Forever-a-Renter?

[thrifty++]

Yep I face this same dilemma. In my city the income to buy ratio is x10. What is it with out of control housing prices.
I am actually thinking of buying at some point because I am finding that the rent keeps banging up quickly too.
I have done the numbers and it looks like I can buy a place and be better off financially than renting the same place. It would just be a nicer place than I would normally rent - normally I would rent cheaper and live in a bit of a cruddy place with other people.
I will probably end up buying a nice one bedroom apartment, move in for about 5/6 months so that I can actually enjoy my massive spend for a bit and then move out and rent it out and move back into a slum-like shared space for cheaper.

[GandK]

Would the dramatic point of decreasing returns be the two/three kids threshold for our home? Meaning our place would definitely be too small for three I would expect. So living here long term could cap our family size to 4.

IME you'd be problem-free with two kids in that space until the older child hits puberty. Maybe a few years longer than that if the kids are the same sex.

I'd kick this can down the road.

[Dragline]

Yeah, and it kind of depends on how you use it. When my wife and I were both working, we had 6 people in 1200 square feet and it was doable, because we just weren't there all the time. Once we were out of debt and she decided to stay home, it made sense to start looking for something bigger.

[jacob]

I should also mention that deciding to buy was primarily an investment decision that made very good sense from a valuation and timing perspective. Valuation was very good. It was half the NAV of what we paid for a 1/1 apartment and a quarter of the NAV for a 3/1.5 house; and it wasn't too hard to predict that the markets would go flat with the main risk being to the downside after QE ended.

Once there's indication that interest rates will go up, it would make a lot of sense to sell again before it impacts housing prices.

[wood]

I've rented for 10 years and expected to do so for the rest of my life due to the freedom, lack of responsibility (which comes with costs) and the high purchasing prices of houses in Norway. All up until last month.

Our landlord is moving into our rental at the end of 2017. We have a very sweet deal, love the apartment and location and so are sad to see this one go. Emotions might still affect this statement but I will tell you: being told to find somewhere else to live sucks, and the next living arrangement will be someplace I own. Never again renting as a "permanent" solution. Just to point out that side of the coin.

[thrifty++]

Yes hence why renting can suck sometimes. Far out end of 2017 is a LONG way away for you though. How much notice does the landlord have to give you. I have just been given 42 days notice to move out by mine, in NZ, which is all that has to be provided if the landlord moves in.

[wood]

They can give you as little as 3 month notice, which still sounds far more than the minimum requirement in NZ.

[2Birds1Stone]

I love renting.

My SO and I rent a 1 bedroom flat in a HCOL area for $1100 total. It is in the basement of a house with a very quiet family living upstairs.

This includes:

Rent
Electric
Heat
Water
Insurance
Taxes
Landscaping
Leaf Removal
Maintenance
Wifi Internet
Large fenced yard with our own box gardens.

We are month to month, the owner is fantastic and the folks who rent upstairs are very easy to get along with and quiet. I am 11 miles from work and SO is 15 miles from work.

In our county the median home price is ~$350k with ~$14,000 in property taxes. The fact that our place is all inclusive for less than that tax bill makes me want to stay here for as long as possible.

[BRUTE]

plus the yard is taken care of. brute believes that "should a human rent" often comes down to "does the human love doing gardening and contractor work". cause it's never done.

[wood]

Wrt having to look for a new place (see previous post), DW and I have been offered to look at an interesting deal:

- It is a stand alone house with a big garden, about 20 minutes by bus from town/work, very close to the forest and nearby waters.
- Basement floor has 6 rooms that can be rented out. Tenants will pay for their own electricity/internet/water etc. With zero to little vacancy the rooms will go for $350-700 per month, so a total income of $2100 to $4200 per month. $3000/month is a very likely average.
- Main floor has shared kitchen, living room and bathrooms for the 6 tenants.
- Top floor has a separate apartment with its own kitchen/bathroom/living space. This is where me and DW will stay and basically manage the place: doing simple maintenance, replacing tenants, collecting rent and paying the owner a fixed monthly price (rent).
- Owner will pay for all necessary maintenance. Some of the maintenance will have to be done by us, like shovelling snow and mowing the lawn. Owner is ok with us "making money on the place". Owner is yet to give us a price.
- We will need to get a bus card ($70/month each).

How much would you pay in rent for such a place?

We are ok doing some maintenance now and then and dealing with tenants. The biggest downside is the location. We are used to be in walking distance to work, town, grocery store, hiking/forest areas. This will almost feel like moving upcountry. But the prospect of free housing, or even get paid from this, is tempting.

[Peanut]

No more than half what you would otherwise for a unit of that size? But I have zero experience with apt management. Just assume that dealing with half a dozen tenants can cause a lot of headaches, especially if they're likely to be college-aged (no offense to students).

[wood]

I'm thinking $1500/month would be an ok deal for both parties. Units of that size typically go for $2000/month, but rarely do you find one with 6 extra rooms. That makes me wonder how much he will ask for. If it was me, I'd ask for $2500.

[George the original one]

20 minute bus commute is easy. Longer than 30 minutes and it becomes a slog. If you have to bus for groceries, then "no deal".

[tylerrr]

I think about this a lot. I'm glad others see the joy/freedom in renting. I could buy a house with a mortgage, but I don't want to be tied down. I rent a place with my partner in Cambridge, MA , which is very expensive, but we love it here.

As others have mentioned, my net worth keeps going up because I invest in the PP and stocks monthly. I really care mostly about my net worth increasing.

I will probably only buy a house if it's in cash with almost no mortgage in the future.

Like someone else said, I may appear poor because I drive a 2009 Toyota Yaris and rent an average sized 1 bedroom apartment, but they don't know I have no debt, work part time, and have reached the crossover point and savings keep increasing.

There is definitely peer pressure at times, but I enjoy watching my net worth increase and having freedom. I've gotten rid of a lot of my stuff so I can easily leave this place and rent somewhere else if I need to....

[Sclass]

I love the Yaris.

I've been thinking about my path the last two mornings and punching different scenarios on my HP12C.

I could buy the home I live in. But as I see it, it would then look like a giant bond that paid my rent monthly. About 4%. Not a good way for me to tie up the money. "Imputed" is the word people have used here...I'll have to look that one up.

When I was younger I could have made small monthly interest payments on a loan and built up some equity rather than pay payments to a landlord. But at the end of the day (like 30 years) I'd own a home that I paid twice the sticker price for - but in yesterday's dollars.

I put down the calculator and just shrugged the whole thing off as a wash. You either rent the home or you rent the money. Or you pay cash and play lender to yourself and get a modest yield. It kinda looks the same to me now. Probably because there are underlying markets that are operating rationally that set the rates and prices. Perhaps inflation drives a lot of the market action.

Nobody is going to give me a giant windfall for doing something this easy and low risk. I look at my old friends in the Bay Area who bought as much as they could afford and yes, they have about $800,000 in equity In their homes. But that is pretty much their entire net worth and they're in their 50s. The same guys complain they want to quit work but they want to stay in their home while taking HELOCs to put Jr. through college.

At the end of the day their strategy worked but it didn't make anyone a millionaire. Even my 76yo friend with a fully paid off home in Palo Alto (~$2M) is still working part time to make her bills. I guess social security isn't enough. No savings in her account. I think she recently took on a boarder.

I'm currently managing my 80 yo mom's finances. She has most of her money locked in the home she lives in. I'm trying to hold off on selling it to keep my dad happy. So I make ends meet by managing a small all stock portfolio of her savings. It is sustainable but it taxes my nerves. My folks are cutting it close if they want to hang on to this home. I guess this is one way to get to retirement.

Only now I can get a glimpse of the endgame. It looks so ridiculous as my aging parents try to cling to their old world. It makes me look back on my own decision to rent forever and not attempt to build a state of permanence.

[JL13]

You either rent the home or you rent the money.

Exactly. They're fundamentally the same thing (owning and renting), financially speaking. Take any property that you're renting, go to Zillow and find out the property taxes, add your own figures for maintenance insurance and HOA, and subtract that from rent. Whatever's leftover is your interest expense. Since you're renting, you're effectively financing 100% of the property, so divide your interest expense by the property value to get your effective interest rate.

I.E. if you rent a place for $12,000 per year, and property taxes, insurance, and HOA if you owned would be $5,000 per year, and it's value is $150,000, then your interest expense is $7,000 which is a rate of 4.6% ($7,000 interest cost divided by $150,000 price). By not tying your money up in the property, you're essentially borrowing $150,000 to invest at 4.6%.

The only other differences are
1.) by renting you avoided the transaction costs (agent plus closing costs county filing fees etc) on both the move in and move out, which are easily in the tens of thousands of dollars

2.) by renting you can't take part in a any appreciation of the property, which can easily be in the tens of thousands of dollars.

I think 1 and 2 wipe each other out. Hence, I rent unless the implied interest expense is something north of 9%.

[Sclass]

You either rent the home or you rent the money.

The only other differences are
1.) by renting you avoided the transaction costs (agent plus closing costs county filing fees etc) on both the move in and move out, which are easily in the tens of thousands of dollars

2.) by renting you can't take part in a any appreciation of the property, which can easily be in the tens of thousands of dollars.

I think 1 and 2 wipe each other out. Hence, I rent unless the implied interest expense is something north of 9%.

There's also inflation. But you kinda cover that with #2. Appreciation inflation call it what it is. I am a little worried about inflation, but I've seemed to stay ahead of it. Buying a home is a nice way to stabilize costs. It's all about rates...which I guess drive inflation if you go by Keynesian theory.

[Ego]

Only now I can get a glimpse of the endgame. It looks so ridiculous as my aging parents try to cling to their old world. It makes me look back on my own decision to rent forever and not attempt to build a state of permanence.

That whole post of yours in brilliant but you saved the best for last.

It really is quite remarkable how the act of witnessing the end of a life from a front-row seat can provide a whole new perspective on the ways in which we manufacture our own reasons for living. Trying to create and maintain a state of permanence is the one raison d'être that many (perhaps most?) North-Americans follow.

Yet by it's very nature life is impermanent and ever-changing, so the world inhabited by these permanence-seekers gradually begins to resemble a wonky, crumbling, improvised, perpetual-motion-Rube-Goldberg machine.

Then again, maybe that's just how I see it. One persons well-oiled machine is another persons Rube-Goldberg.

[JL13]

There's also inflation. But you kinda cover that with #2.

In theory, your other investment also keeps pace with inflation so I disregarded that.

[Sclass]

That whole post of yours in brilliant but you saved the best for last.
.

Thanks Ego.

No brilliance. Just living in a freak show.

Been thinking about you as I watch them empty the Sports Chalets in OC.