Rent or Buy a house (assuming you can afford both)?

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blackomen
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07 Jul 2019, 9:53 am

Assume that I'm able to afford to buy a house and I live in an area where housing prices aren't outrageously expensive compared to renting long term, what would be a more reasonable option?

A lot of people who swear by buying their own home make the recommendation under the assumption that you can fix things yourself while as a renter, the cost of maintenance is already baked into your (likely) high rents. However, this all falls apart for me (no pun intended) since I have major issues when it comes to fixing their and working with my hands. I'm terrible at taking things apart and putting them together again, and if my car is any window to the problem, I've ALWAYS had my car maintenance done at a mechanic other than dead simple things like changing an air filter or tail light bulbs. In addition, even the thought of having to take something apart is enough to trigger a panic attack in me since in the past, I've rendered my car inoperable when I tried to do maintenance on it as well as a former home I've owned. Any time something that is crucial to my daily routine is broken or left dysfunctional, even temporarily like more than several hours including my car, my toilet, the doors/windows to my house, etc., I'm driven into a panic attack or meltdown. And I've broken things countless times in the past due to my natural mechanical incompetence.

Given all of this, would it be feasible for me to own a home again in the future? I used to own a condo for a few years and every time something broke, it sent me into a panic attack trying to get it fixed myself or having to hire expensive contractors to come over to fix it. When I moved, I turned that into a rental property instead and have been renting since then.. and nowadays, if something in my home breaks, it's just a simple email to my landlord to get it fixed.

Yes, I also understand that some people consider their home as an investment although I kinda disagree. If this is an "investment", it's the most pain in the butt investment ever since you can't easily get in and out of it with a click of a button. I've invested in stocks, bonds, ETFs, and mutual funds for over a decade (started in early 2008, probably the worst possible time) and spend maybe at most several hours a year managing them since everything can be done online. If you buy or sell a house, it takes a lot more logistics, phone calls, paperwork, etc. than simply clicking the buy/sell button. Yes, stocks can be risky and real estate can seem safe, but real estate prices aren't reported like every minute unlike stocks which gives them a false sense of stability. Also, I simply buy and hold investments in a passive portfolio, and studies have shown than passive index investing has been far safer with higher returns than trading stocks, which is what most people think of as stock investing as.

What do you think?


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jimmy m
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07 Jul 2019, 10:31 am

There are advantages and disadvantages to both approaches.

One of the advantages of owning your own home is that once you pay it off, it is yours. Many Aspies are worried about becoming homeless and living on the streets. If you own your own home, this is less likely. I built my own home 40 years ago and never had a mortgage on my property. I own if free and clear and ownership gives me great comfort.

One of the other advantages in ownership is that you can do what you want with the place. You can modify the dwelling to meet your needs. It is more difficult to do if you do not own the property. For example, I hate having appliances die and need repair. Many people simple buy another as a replacement and then move on. But I feel like these appliance should last forever and be as close as maintenance free as possible. So one of my observations over my life is that well made appliances develop a good reputation and these will come close to meeting my objectives. So that is what I purchase. It may cost me twice as much as the generic brand but in my view they are worth it. A few months ago, my Maytag washing machine broke. I complained to the repairman that it broke. Then I realized I purchased the washer in 1986 which was 33 years ago. He said "You are really lucky, many washing machines only get ten years of life." So purchasing that particular washing machine was a good decision. By owning your own home, you can purchase top quality appliances, even built-ins and not worry about things breaking as often.

But if the housing market is way overpriced, renting may be more attractive approach than purchasing. But this can also produce a trap. When I lived in California many decades ago, I lived in an apartment a half a block from the beach. My rent was $100 per month. I was faced with a decision of rent or buy. House prices in the area began to rise quickly and in short order I was being priced out of the housing market. So I took a leap and bought a house. I could barely afford the house, but I purchased it. In three years time, my house doubled in price. If I waited I would never have qualified for ownership. The trap was that after house prices rose, then the apartment prices began to rise to keep pace. The reasonable rent on the apartment next to the ocean over time skyrocketed and I did not control the rental prices.

But on the other hand I am good at fixing things whereas you are not. But for me this is not a rent/buy ownership consideration because the main objective in your case is to find a very reliable inexpensive repairman that will come by at a moments notice. Today there may even be apps for that.



Fnord
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07 Jul 2019, 11:01 am

Well, technically, the real-estate management business I own owns my house, and I just pay rent. Not only does this limit my liability should someone get hurt on the property, it also means that the business manager is responsible for maintenance and repairs (not me).


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nick007
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07 Jul 2019, 5:32 pm

I've seen commercials for home warranties that supposedly would cover things breaking & needing repair. Some of the commercials talk like the warranty company would hire someone to fix the things. I'm guessing these home warranties work kinda like health insurance where you'll have copays, deductibles, & might need approval for some things. Home warranties might be one option to consider while your debating owning or renting. I'm horrible at fixing things too blackomen. Another thing to consider is if there is a chance you might have to move down the road for some reason. I think buying a home would be kinda like buying a car where the value would go down 1ce you've moved in so you might come out ahead renting if you'll be moving out anytime soon.


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aspieprincess123
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08 Jul 2019, 11:46 am

Me and my partner own a house but there is no way I could afford to get a mortgage on my salary on my own. I only earn 15k a year in British pounds.

My partner earns base pay 37k a year but he also does some out of hours work and overtime in projects which for example last year out his wage to 48k a year.

Our mortgage is small simply because my partner has been overpaying it the last 3 years and he placed a massive deposit as well.

He also is quite handy the first thing he did was install cat7e cabling in the house which was frustrating as he had holes in the walls bit he fixed them so I'm happy. We also have a cupboard with a network switch can inside lol.



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09 Jul 2019, 7:12 am

The bottom line is that I rented and my wife bought. She had a LOT more money saved than I did and we have a nice house solely because of the equity on her property. It also helps that in our city the housing prices (and rents) continue to get higher literally every day. There is also the fact that our mortgage + taxes are far cheaper than what our next door neighbors are paying in rent.

I regret every day not buying a crappy house rather than renting a mediocre apartment because I literally could have lived for free (rather than paying almost 50% of my salary in rent) since the house I was looking at went up about 40% in value in 5 years. It doesn't help that my city is full of renters and there is a massive shortage of rentals even with about 6 brand new high-rises just in my neighborhood alone.

In my experience, being a homeowner isn't scary at all (most issues can be prevented with proper maintenance) but I do miss being able to call up the landlord and get next day service at no cost.



IsabellaLinton
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09 Jul 2019, 7:27 am

Buy if you can commit to the location, because mortgage payments are generally lower than rent after a few years. You can also use the equity as collateral for loans or to finance home repairs. When your mortgage is paid in full, you'll be living 'rent free', as well. I think renting is smart for some people who want to move around a lot, or people without children, but it's nice to stay put and grow a nest egg (for yourself and / or your kids), if you can.



kraftiekortie
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09 Jul 2019, 8:08 am

Mortgage payments are virtually always lower than rent....because rents are usually increased over time; whereas mortgage payments remain the same (if a fixed-rate mortgage.



IsabellaLinton
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09 Jul 2019, 8:13 am

kraftiekortie wrote:
Mortgage payments are virtually always lower than rent....because rents are usually increased over time; whereas mortgage payments remain the same (if a fixed-rate mortgage.


It depends on the term of your fixed-rate, which depends on the prime lending rate. My interest rates have varied between 3% and 9.79% on the same home, as the bank rate adjusts (generally 5-10 year terms).



kraftiekortie
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09 Jul 2019, 8:26 am

In the US, we have 30-year fixed-rate mortgages whose interest rate NEVER changes.

Canada has the 5-year system, like the UK.



IsabellaLinton
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09 Jul 2019, 8:29 am

kraftiekortie wrote:
In the US, we have 30-year fixed-rate mortgages whose interest rate NEVER changes.

Canada has the 5-year system, like the UK.


You only have 30 year rates in the US? That's brutal. When the economy is bad, no one could buy a home. :(
What is the lending rate right now? Just curious.



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09 Jul 2019, 8:44 am

I asked for and got a 15 year mortgage. And paid it off a couple years early before my partner passed. Now my expenses are really low because I can fix all sorts of stuff. A good investment because I bought it when prices were low.

Renting may be better for those who can't handle home maintenance. For me, fixing a clogged drain line myself is less stress than calling a plumber to fix it. And I get to celebrate by buying something as a reward!



kraftiekortie
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09 Jul 2019, 8:55 am

I would say, for the most part, about 4-5%. The minimum rate is about 3.5%.

Around 1980-1982, the interest rates were about 15-20%.

We have 15-year mortgages, too----but, by far, the most common are 30-year mortgages.



GiantHockeyFan
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10 Jul 2019, 7:00 am

kraftiekortie wrote:
Mortgage payments are virtually always lower than rent....because rents are usually increased over time; whereas mortgage payments remain the same (if a fixed-rate mortgage.

That's another good point: my rent went from $790 to $815 to $855 in three years. My mortgage is still the same despite the fact interest rates have increased 4 times in 2 years: all that means is that I have 29 years left on a 25 year mortgage. In short, I can pay off more in the future where my financial situation will be likely be much better. In renting, they will just evict you especially since there is a massive shortage of rentals thanks to Airbnb.

I was just looking at comparable housing prices in a similar sized US city and man are we ever getting the short end of the stick. I could live like a king in the US at least until I got sick :D



jimmy m
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10 Jul 2019, 1:14 pm

Yesterday, I saw an example of the trap that one can get into when they rent verses buy.

There is currently a shortage of affordable housing in cities like San Francisco and Los Angeles. As a result you can rent a bunk bed in a communal space for $1,200 a month. It’s called PodShare and it’s located at Post and Hyde Streets in the city’s Tenderloin neighborhood. People pay to use one of the beds – or pods – as a living space. For the $1,200 price tag, you get a bed and a locker, plus access to WiFi, food staples like ramen and cereal, and basic toiletries. You even get a television too!

Source: These San Francisco bunk beds rent for $1,200 a month – ramen, toiletries included

This would not be my choice of housing.