Question for Home Owners / Buyers


(seven) #1

I currently rent and Iam looking into buying a home. But as I look I constantly notice that the homes being sold are rented out. And the person renting the home is paying for example $500, but to buy the home it only costs $300 with a 30 year morgage (including tax, intrest, morgage, and insurance)?

My question is this
Why the hell would someone pay $200 more a month to rent when they could just buy the place?

Is it because if something goes wrong with the house someone else would have to pay / maintain it? I just cant beleive that I will be buying a home and paying a $300 a month morgage while somone else will have the exact same home paying $500 a month in rent. And in 20-30 years I will own the place and they will be out a couple thousand dollars?

Am I missing a major cost / point? Or is it that people just want someone else to be responcible if somthing goes wrong and are willing to pay lots of money to have someone else deal with the headach?

Just incase anyone cares I spent $40,000 in rent in the past 6 years, it is proably time to buy a place and stop pissing my money away :smiley: .


(lucidMonkey) #2

do it… i don’t know where you live but wow… much lower than the cost of living around here.

rent is about equal to similar mortage payment around here (New England, USA). All the other expenses are as you say, upkeep oriented. the main reasons i think people don’t buy is they are too lazy, unwilling to take the risk, and many just don’t have the credit required to buy a house.

I think housing prices will drop for at least a little while though… Intrest rates on home loans are climbing which inevitably will lower the price of houses. You would be suprised how much 1% higher intrest rate can affect your monthly payment.

anyway, it would be useful to know where you are planning to buy because every country and every region are different.

Good Luck!


(shr1k) #3

I just got a house I pay about the same as rent. it took me 3 years or so to get to a point where any lender would even look at me as a customer I didnt have bad credit I just didnt have any. also I am self employed If 3 years ago I could have saved 200 dollars a month I would have any one would. right now credit is handed out. dont get in to far, keep it small, have you ever had a hard time coming up with rent? buy if you can say no to that or be prepared to start working extra, when youre furnace goes south. good luck.


(traitor) #4

yep, rent money is dead money. the sooner you get a property the better, its a tough market to get your foot in the door, but once you’re in its a bit easier. theres a few sneaky tricks, a friend of mine bought a house too big for him, and rented as well to some flatties, which pays his mortgage each month, and he only has to pay 1/3 of power and phone bill costs. easy way to get the first quater or so of your mortgage paid off, then you could, i guess, make mortgage payments on top of that to get it out of the way quicker.


(Alltaken) #5

yes you are missing a number of costs… however a home is a major asset so in the long term by mortgaging you will have more money (depending on income and interest rate).

you have three major cost (not including interest on the mortgage)

Rates/ taxes
Insurance
Maintanence and repairs

rates for us are about $3000 a year, then the insurance (dunno how much that is) and repairs we probably put $2-3K per year into doing up the house. (new deck, concreting, painting…) that can be lower, or higher depending if you want to maintain property value, or increase it…

so all up i would excpect that you would be looking at around $500 or more per month. but in the ned you will get about 50% of that back directly when you sell the house. so its a savings plan as well as an expense.

Alltaken


(ajc158) #6

They might not have the money for the deposit on the mortgage?

Alex


(artjunky) #7

One piece of advice…Buy if you can.

for some it’s easier to rent as you don’t have to worry bout insurance, constant repairs, taking care of the yard, etc. And don’t forget property taxes. Just remeber you are paying for ALL this stuff when you rent, just indirectly.

Others don’t buy because they don’t have the credit or the down payment.

The expenses of owning and buying about even out over time, depending on the market you live in, but you OWN the damn place.

Currently, my two homes, I rent one out, make more money than I do. In the last 3 years the values have increased almost 200k. I plan to sell my condo next year when my renters are done. I bought for 45k in 2001 and it will sell for over 150k next year.

So the answer is BUY!!!


(seven) #8

thanks for the tips, seems most people agree that it would be best to buy.

i also got contact back from a realtor the the places i saw were in need of some heavy repair? so i will look into buying but right now with homes selling like they are i’m not sure.

what do you guys think of mobil homes, haha, they have such a bad reputation as being white trash, haha. but i found a cheap mobil home in a low land rent park close to the beach, and i’m considering it. it will be less up keep then a home, and cheaper i will be able to save a lot of money each month. but on the down side i have heard of people getting stuck in a mobil home park and getting screwed by the park owners who jack up the rent price, so you cant sell cause no one wants in, and you have to pay the high rent, i will have to look into that. but instead of getting all my money back when i sell the home, i will only get about half back (half is land rent). anyone have experiance with mobil homes :expressionless:


(Alltaken) #9

mobile homes are totally unheard of in my country except for holiday homes and caravan parks.

depending on the contract it might be ok. i.e. don’t get into a contract that you can’t walk away from.

the park owner should not be in a position to both rent you the land and notown it. i.e if you buy the land then pay rent and can’t sell it later coz nobody wants in it is very dangerous.

if a trailoer park can just rent you the land without you buying anything (or having any obligation to stay there) then it would be ok.

here any trailer park properties (for holiday homes) are normally done on fixed term contracts i.e. a year, 5 years… but are not open ended as those sound.

Alltaken


(Bussman) #10

Buy, don’t rent anything (even land). Since you don’t have anything right now, you can take your time and read up on the subject. The market is slowing down in several areas now. Wait for the right opportunity while saving your money. A house that needs work is not a bad deal if you are handy with tools and you can appraise what needs to be done. Still, get your prospective house properly inspected by a professional of your choice.

I bought our house when the market was dead. I bought small. Made many of the additions and repairs myself (still doing it as I write this). I’m paying less now than when I was renting (including utilities, insurance and everything). The best part is I’m not putting cash into somebody else’s retirement. All the money I put in the house will come back to me when I sell it.


(NeOmega) #11

Only buy if you plan on staying.

I don’t want to buy, because I switch jobs alot, and do not want to be pinned down to a commute I don’t want to make. If you are in a job you plan on making a career, then buy.

There recently was an article in Fortune why renting was smart… but I have no idea where it is, or why it said it was smart anymore.

Everyone is saying buy buy! I say wait wait, for the housing bubble to burst… only a couple more years. That’s my plan.


(Zenitor) #12

NeOmega:
In good economic time buying is always better, but in the event of a crash or bubble bursting all bets are off, so research and know your market.
in good times:

  1. you can rent your house out, if the rent covers mortgage it’s better than shares
    ie house on average double in price every ten yrs, 10%pa
    you only pay deposite of say %10… you make interest on money you never had, you can’t rent out shares, banks will not lend you as higher rate on shares either. an example…

$10k initial deposite on a $100k house
rates and repairs of $5k pa over 10yrs
=$60k
in 10yrs house is worth 200k… that’s a good return
and time flys man…
#every year you delay is another $10k on the price, will your wages and saving increase $10k pa after rent?

The other aspect to consider is if you own a house, you can do what ever you want, improvements, personal touches, sound studio, bar, indoor swimming pool etc.

##I live in The Netherlands, my house is on the oposite side of the world in New Zealand, had it for almost 10yrs :slight_smile: rented out for 4yrs this time, 2.5yrs the time before that… No way I could buy it now.


(Bussman) #13

And if you buy right, you may do better. My little house doubled it’s market value in half that time.


(sundialsvc4) #14

I agree with NeOmega. It does not sound to me like you are in a sound financial position right now to take on a mortgage, and you’re looking at houses which would be nothing but trouble if you bought one. “If it sounds too good to be true, it is.”

I owned a home off-and-on for about fifteen years, buying it at the cusp of a housing bust and selling it with reasonable profit. But I had of course paid about three times as much over the years as what had actually accumulated as “equity” on the home, so I really only got a chunk of that money back. I did not finish, fifteen years later, with more money than I had spent. And I owned it for fifteen years! Furthermore, if I had not bought at the bottom of a housing bust, I probably would have come out about even-steven.

(Naturally, I was never stupid enough to take out any “second mortgage” … “home equity loan” … or any of that riprap. When I sold, the agent told me that she’d seen houses with four “seconds!”) Ain’t no such thing as free money, anywhere.

I wasn’t forced to sell, wasn’t in any kind of economic hardship or other calamity. I simply chose, carefully, to do it. To sell, get out of the market, and stay out for the time being.

Ever since that time, I’ve rented, and I’m happy so to do. I pay less, for a very fine place to live, and I’m not responsible for upkeep or mowing the lawn… and if a puddle suddenly appears underneath the water heater I just call maintenance, not Home Despot. I know exactly what my housing costs will be each month.

Right now I believe that we are at the cusp of a housing bubble that is already beginning to go down. I cannot overlook the “Stop Foreclosure!” advertisements, now painted on trucks that drive through “affluent” neighborhoods as though they were selling ice-cream. If you sign a note for $200,000 and the demand for your home does what every real-estate agent claims it will never do, you can be trapped in your own home! Having bought my previous home off the back of another man’s misfortunes (he did Chapter-7), I know that what goes up will come down and I have no interest in becoming a prisoner of ill-timing. Oh, I may buy another house someday, but not at these prices, and not for these crappily-built shacks!


(seven) #15

sundialsvc4- i like what you have to say. i too think i may rent untill this realestate bubble pops, and then hopfully i can get somthing decent for a good price. but as you say now it is just useless shacks, most in my price range are boarded up peices of shit that people want 60 to 70k for.

but i really would like to buy and i will risk it even though i dont have much money. basically because i will never have much money in my line of work, but i’ m content with my job so it is a fair trade to me.

but when the market pops and all these greedy people stop asking for close to 100k for a shake, and things become more reasonable i will take the plunge and stop renting.

but it is always a catch, pay rent and have someone else fix your problems, or own and pay morgage and fix your own problems, and in the future own with out haveing to pay anything monthly, or fix up and sell for a profit, or to even get your money back.

so i guess the summary would be, iam going to rent untill the realestate market becomes sain again, and then i will get a good realtor/inspector and find a good home to invest in. i really am excited about owning a home and having somthing stable, but i can not afford to buy a home right now, and i really am not willing to pay a fortune for a home that is really not worth it!


(JABayne) #16

I’ll try my best to not repeat others.

Buying and renting are two different beasts. If you rent you have a landlord, but as annoying as they can be at the end of the day they are responsible for the property. They pay the taxes and they fix the stuff. If it burns down they have to rebuild it etc. When you buy a home you can do what you want to it, and as long as you pay the bills no one bothers you, UNLESS, you live near a homeowner’s society. Watch out for these guys. They will tell you what colors you can’t paint your house, what plants you can’t use, where you can’t grow trees, and I have even had my father-in-law get told that he needed to rent a lot somewhere else if he wanted to park his deep sea fishing boat in the driveway.

I own a mobile home so I’ll answer this question quick. Buying a mobile home is almost worse than renting. Mobile homes are like cars in that the depreciate in value. When you get the home you almost immediatly drop in value. I purchased mine for 40k with a 9% interest rate for 30 years. At the end of the mortgage I will have paid out over 110k for the home. Trying to sell the beast and to come out clean on the otheside is not an option. Basically I am stuck unless I want to sell it and carry a balance to another mortagage. The other thing is that with a home you can refinance it, because it is a permenant structure and appreciates in value. You cannot refinance a mobile home so you are stuck with the %rate you get. That is why I am stuck at 9% while others are refinancing at 5-6%.

If you want to buy a home make absolutley sure you will live in the area for at least 5 years, and that you have close to 10% as a downpayment. Otherwise moving or payments to your loan will result in a loss of money not gain when you sell the home.

Lastly, you could buy a used mobile home from a sucker like me who bought it brand new. You pay a heck of alot less for the same structure and can put the extra cash into buying your own lot of land to avoid the renters/landlord syndrome. Putting in a mobile home on an undelveloped piece of land involves adding electric, water, and sewage lines as well so watch for these hidden costs.

Hope this helps.

JABayne