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Thread: Rent vs Buying a House

  1. #16
    L6 Recruit jaysjunk2000's Avatar
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    For those of you that need to get a mortgage (I certainly can't buy straight out with cash) The Fed is supposedly going to cut rates "for the last time" in the next few weeks. This might help interest rates for buyers by lowering them although the last few rate cuts did the opposite because the risk for lenders went up. But the thought is that a short time after the rate cut the market will improve and rates will start to drop initially due to the lower risk to the lenders after more people get loans.

    But hey what do I know I'm only a rocket scientist who deals with logic and math every day and as we know economics is driven by consumer conjecture, ill informed predictions, and whim.

    Oh and don't forget to vote in the upcoming elections because the president/government has such an effect on the price of gas, housing market, and price of goods. LOL:p

    Apparently I'm cynical and sarcastic too!

  2. #17
    Do not disturb my circles monkfish's Avatar
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    Quote Originally Posted by RobG View Post
    To rent an average house in my area is about $2000 a month times 12 thats $24,000 will a house he's looking at fall another $24,000 probably not.

    Your Number not mine if it happens an AVG $150,000 house at 5% $7500 at 10% $15,000

    Look at the tax breaks of owning a house write off of mortgage interest and property taxes makes the amount saved even more.

    I see losing a lot more than you are saving by waiting
    Your misunderstanding is pretty common. Time Value of Money calculations involve exponential growth/decay, which is where most people's intuitive grasp of number breaks down.

    Take your $150K property. To make calculations easier, we'll pretend you finance 100%. Buy today with a 30 year loan at 6.5%
    At the end, you've paid over $340,000 for the property

    Buy next year after a 5% drop in value, and that same property is purchased for $142.5K, and after all is done you'll pay about $324K. With your savings on the property added in, you could have paid over $24K in rent and still come out ahead.

    Similarly (but magnified) if values drop 10%. Cost of property $135K, total payments $307K, and you could have spent almost $50K on rent for that one year and come out ahead of the deal.

    You should also check with your tax adviser. Property tax is not written off. It is deducted from taxable income in most cases. The mortgage interest deduction is a wash, since you get that deduction in both scenarios.

    Of course, these are just rough numbers with a simplified model, but the point is that, in many cases, a person will do better to hold off on a purchase decision when the market is going down.

  3. #18
    L9 Corporal RobG's Avatar
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    You must be a landlord with your kind of trash thinking.

    If it takes another 2-3 years for the market to turn around with rent at $2000 times your at $72,000 and what did you gain nothing. No Tax deduction at all for anything on the 1040. Some states may have a partial renters rebate thats is.

    Also if you own your home like most americans its an avg ownership of 7-9 years

    less than 15% keep a mortgage for 30 years most either pay it off or refinance

    google WSJ for true facts

  4. #19
    Do not disturb my circles monkfish's Avatar
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    Quote Originally Posted by RobG View Post
    You must be a landlord with your kind of trash thinking.

    If it takes another 2-3 years for the market to turn around with rent at $2000 times your at $72,000 and what did you gain nothing. No Tax deduction at all for anything on the 1040. Some states may have a partial renters rebate thats is.

    Also if you own your home like most americans its an avg ownership of 7-9 years

    less than 15% keep a mortgage for 30 years most either pay it off or refinance

    google WSJ for true facts
    Build a spreadsheet, and run the numbers. I ran them with the assumptions you stated, and you came out wrong.

    re: 2-3 year turnaround
    This will just amplify the effect I was talking about

    re: avg ownership 7-9 years
    Most people trade into a new home after that time period, so the model keeps on running, but with a new property underneath. Actually, this is where most people will feel the pinch, because they've leveraged their down payment with the mortgage loan, but the value loss is multiplied entirely onto the down payment (equity).

    re: refinance
    This just rolls the whole model forward. Same system mechanics still apply.

    Any decision involving $100k and more is going to be more complex than can be modeled in a few lines of an online forum. I'd strongly recommend anyone in the position to be deciding this issue talk with a financial professional first.

  5. #20
    L9 Corporal RobG's Avatar
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    Ok even if a property ends up costing $340,000 and people are not smart enough to pay it down in 30 years


    It takes 30 years to pay out $340,000 and you have a property that went up in value

    Rent will go up where a fixed mortgage is just that a fixed mortgage payment

    If rents stays the same you paid $340,000 in 170 months and HAVE NOTHING

    I think monkfish needs a professional

  6. #21
    Do not disturb my circles monkfish's Avatar
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    Quote Originally Posted by RobG View Post
    ...
    I think monkfish needs a professional
    ha ha ha. cute pun.

  7. #22
    L17 Officer cybermom's Avatar
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    Now I'm totally confused, but I just leased a van, I have a house I'm going to sell...and I'm staying in my current home for at least another year....

    is that OK with all of you?
    "Make sure you put on clean underwear"!

  8. #23
    It's like déj- vu again spazntwitch's Avatar
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    LOL Yes cybermom.

    If it came to it again, my wife and I would own another trailer. We paid $19,500 for our first one (which we later sold at the same price) and our second one at $6,600 (which we sold after living in it for two years and upgrades at the cost of the upgrades and original purchase price). Lot rent for both places was around $200 per month.

    It didn't matter that we didn't live in a nice fancy house because we were able to put money aside for a structure home purchase. And just the fact that if we wanted to paint the wall or do anything else to the trailer we could do it for the simple reason we didn't have to request permission from an owner.

    And as an aside, be sure you get renter's insurance if you are simply renting. The property owner's homeowners insurance won't pay for any of your stuff it the property is damaged.
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  9. #24
    L17 Officer cybermom's Avatar
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    ......i own my current home too..and I'm with you on the being able to paint, or even nail a picture on the wall without permission! I definitely prefer owning to renting, (I only ever rented apartments though and I always kept renters insurance)..

    But if someone's considering your first home purchase keep in mind a word of warning..budget more than you think! People make the mistake of thinking they're swaping one payment for another and don't add in all the other bills that come along with a home. I'm not just talking utilities, I'm meaning the upkeep!
    "Make sure you put on clean underwear"!

  10. #25
    L1 New Member xcheck's Avatar
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    Quote Originally Posted by cybermom View Post
    I was told the rule is this: Never pay interest on a depreciating asset. I.E.: Buy property, lease cars.
    You will lose money on a car regardless, but you can minimized the impact by purchasing. At the end of a lease you have nothing; at the end of a 3 or 5 year car loan, you will have a car. (It may be really crappy and worth a couple grand) but it's still a tangible asset.

    There are a few autos that hold their value better than all others::

    Corvette (any year or model)
    Honda (Civic or Accord)
    Toyota (Camry or Corolla)

  11. #26
    Do not disturb my circles monkfish's Avatar
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    Quote Originally Posted by RobG View Post
    Ok even if a property ends up costing $340,000 and people are not smart enough to pay it down in 30 years


    It takes 30 years to pay out $340,000 and you have a property that went up in value

    ...
    So, Rob, give us a 6-month update. Did your house go up in value? By what percent?

  12. #27
    L14 Officer MysticalChic's Avatar
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    thank you
    Living in the moment

  13. #28
    Do not disturb my circles monkfish's Avatar
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    Housing prices fall, on average, by 14% during October.
    http://www.nytimes.com/2008/12/31/bu...prod=permalink

  14. #29
    . druvans's Avatar
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    Quote Originally Posted by monkfish View Post
    Housing prices fall, on average, by 14% during October.
    http://www.nytimes.com/2008/12/31/bu...prod=permalink
    Halloween is over, pl dont post scary news

  15. #30
    L0 N00b jams002's Avatar
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    ya lot of people considering buying an home..but to rent an home!!even me I'm considering buying home even an renting...

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