Yes utilities are higher because...the average house is much bigger then the avg apt. I know we had this exchange before and you think that your comparison is fair but its seems ridiculous to me. Why dont you try comparing buying a house to renting the same size house? If you are not going to make an apples to apples comparison then you should compute cost per sq foot of living space per year. There are huge apts and tiny houses but if you are going with the median then I would bet the avg house has easily twice the living space of the avg apt.
The truth is, you can create a model to support both positions. From reading this thread, renters truely don't have a handle on what it costs to maintain a home, do you think that as a homeowner you are not going to figure out ways to solve problems without paying top dollar? Example, I had AC installed last year for $1500, when the avg price was $5500 from 3 different companies. Most of my plumbing problems are solved by myself, by god if a guy who shows more of his ass crack than I care to see can fix it, I certainly can. $50 for an inexpensive 25 foot snake and most drain problems are solved by me. I needed some retaining walls installed, so I built them myself. A couple hundred dollars in cottage stone from Dixieline, and a few minutes discussing a solution and the problem was fixed. My point is, it does not cost 5k a year to do maintenance on your home when a little bit of research can get it done for less than half of that. I little bit of sweat equity, and you can get it done for a quarter of that or less. One other comment, do you know anyone who actually saves more on renting vs buying that is actually investing that difference in the market? It is one thing to talk about returns, quite another to actually get them. And it is really tough to stick with any strategy and consitently follow it after it has had 1 or 2 bad years. The reality is, any savings will be thrown into the checking account and used to reduce the credit card debt, or spend on some other frivilous spending. There will be a few exceptions to this, but 90% or more won't. They will likely get 4% in their savings account, and pay taxes on that. That being said, one has to acknowledge that the easy money has been made in real estate for a while. The market will likely linger around for 10 or more years without any real appreciation. To make money going forward, one is going to have to find don't wanters and negotiate great deals, OR there is also money to be made in the fix up game, particularily in the sweat equity area where you invest your time and money and manage the project on your own. It would be great to see someone on here who supports the renting philosophy start a journal and keep it going for 30 years so we can monitor their progress and see them actually execute their RENT vs OWN plan. Any takers?
Winter, Or why not live in your car for even greater savings? As I've stated before, if your goal is strictly to maximize the return on your investment, regardless of lifestyle, then you should rent the median apartment because my analysis shows that you get better returns than buying the median house. Of course, I had to make some assumptions in my analysis, and I welcome criticism. I like to be proven wrong because then I learn something new. I've already given aesthetic reasons why, for some, like myself, living in an apt is preferable to living in a house. In my interpretation of the American Dream, the more you own, the more it owns you. (I realize I'm in the minority on this.) For these reasons, I would personally never rent a house vs an apt. It costs more, I'd have to fill it with crap that breaks, and I'd have to spend more time doing house and yard work. Unlike the average poor renter cited by OldTrader, I have the financial means to buy or rent a house, but prefer to rent an apt. (I've considered buying a condo but the HOA fees blow that investment argument out of the water.) But again, lifestyle is too subjective and can't be quantified. Just realize that there are those of us who cringe at the notion of living in a house because it's a form of enslavement. Fortunately, my lifestyle preference SEEMS to coincide with higher returns on investment if I invest my substantial disposable income wisely and consistently. It's a win-win: I don't have to mow the damn lawn and I save money.
Exactly my point. Its like comparing buying a motorcycle to renting a car because they are both modes of transportation. They are not equivalent thus the financial analysis is flawed. Then you should be comparing buying a condo to renting an apt. Your current analysis is comparing two unequal things at the same time as the rent vs own issue.
You hit the nail right on the head, literally and figuratively. I don't want to fix things around the house. It's my personal idea of hell. Yeah, me. I acknowledge that I'm in the minority -- but since this is Elite Trader, we are all exceptional here. And I acknowledge that I wish I had flipped a house from 2001-2005. But that particular opportunity is over. I'm betting on commodities.
I don't think you see my point. It's not about making an equal comparison; it's about maximizing returns.
Having both owned a home around Dallas/Ft. Worth, plus having extended family members who currently own a 3000+ sq. ft. home in the in the suburbs north of Dallas, and also currently renting a small apartment ( due to a personal divorce situation, not permanent decision ), I feel I can add a few comments to the discussion. First, let me preface this by saying that it is definitely NOT an apples to apples situation. By this, I mean it is generally not very smart to buy a very small home, and it is also not very smart to rent a very large apartment or home either instead of buying. Given the choice, most of us (myself included) would PREFER to own our own home, than rent. But this is usually for LIFESTYLE considerations, not necessarily always FINANCIAL considerations. I have also noticed over time a large percentage of the public seems to believe that it is ALWAYS right to buy a home at any price and ALWAYS stupid to rent an apartment ever. Personally, I think this is wrong for several reasons. These are some of the overlooked points I have noticed: 1. Housing maintenance - Foundation problems Homes around D/FW tend to have major foundation issues at least 30-50% of the time, many times requiring significant foundation repair work, which can easily cost $10K or more to fix. This is of course a REGIONAL factor and would not apply in all markets. Some of this can be prevented by "watering the foundation" and such, but not in all cases. I have seen some previously flat streets that look like an earthquake occurred (roads really humpy all over, new small hills that were flat before, etc. ) after about 5-10 years just from normal aging. The clay around the D/FW area is really nasty for movement over time. 2. Housing maintenance - Fences Many of the newer developments in the Dallas suburbs have wood fences in the back yards and along streets, or some brick fences. Due to the foundation problems mentioned above, these fences are usually not good for more than about 5-7 years before needing to be replaced. Many times they will rot, bleach out, blow over in storms, or get moved around to where they look dumpy ( yes, even the brick ones - ground movement again here ) after a few short years. 3. Housing maintenance - Neighborhood fees. Some of the subdivisions actually charge yearly fees to maintain the subdivision. In some cases, these fees can get to be $100-$200 a month or so. 4. Housing maintenance - Appliances, lawn care tools Most homeowners will end up repairing or replacing appliances (oven, refrigerators, dish washers, washing machines, etc.) unless you have just moved into a relatively new home. Also, it can get expensive buying lawn mowers, fertilizers, garden implements, trimming trees, and paying for lawn services. Also, around D/FW you tend to have to replace and/or reseed grass a lot due to the heat. Watering isn't cheap, and sometimes you are prevented from doing so if there are drought conditions, so when that occurs your lawn needs major work afterwards. 5. Housing maintenance - Hail-induced roof damage A lot of homes around D/FW are vulnerable to hail damage from storms. Sometimes you are MANDATED to replace a nearly good roof, just because of seemingly MINOR hail damage. My relative has had to do this TWICE over only a 10 year period. Sometimes insurance covers this, but usually at the price of a large deductible, and major increases in rates. 6. Homeowner's insurance - EXPENSIVE as hell The homeowner's insurance these days around D/FW is EXPENSIVE, EXPENSIVE, EXPENSIVE... Not to mention they no longer cover mold damage, and sometimes it can be hard to even get any coverage at all if the home has previously had any water-related damage claims. 7. Neighborhoods change quickly in D/FW What were premier, new subdivisions about 10-12 years ago around Flower Mound (north of D/FW airport), are now considered also-ran, overpriced, dated and dumpy looking. This also affects resale, since there are tons of new or almost new homes on the market, you lose a lot in resale if you overstay the neighborhood. Optimal seems to be moving about every 3-5 years, but then you factor in resale costs (realtor fees, preparing the home for sale, competing with new builder specials), and you see the issues. If you stay put, you get to pay increasing property taxes based on inflated appraisals which you cannot realize in the marketplace. And you have to sell your existing home against a plentiful supply of BRAND NEW homes which do not suffer from issues 1 and 2 yet. Some other points to consider. In about 3 years of renting currently (rent $900/month for 2 bedroom), I have had 0% rent increases for 2 years, and only about 3% over the past year. In addition, I can get my carpets steam cleaned for free every year, pay NOTHING for any maintenance, insure my belongings for less than $40/month, pay less than $100/month for electricity, less than $20/month for water, free usage of a well-maintained pool, free usage of a well-maintained fitness center, and have maximum flexibility regarding when I want to move, or how often I can move. In addition, I live in a really good neighborhood where the average houses are $250-$300K so my kids can go to quality schools. The current monthly payment (PITI) of most of the homeowner's in the area is north of $2000/month. I am paying less than half of that. And the housing appreciation has slowed way down in this area, to less than 5% a year with a big risk of flat prices for some time. Regarding the supposed "tax advantages" of the house. Well, guess what - for married people making 6 figures or more, you have to clear about $11K in itemized deductions before you get a single PENNY of benefit from tax deductions. Also, what you win there, you will lose back a lot of times from AMT if you sell ISO options, or have both spouses working. All in all, it is MINOR benefit at best, not a major benefit like it was about 10-15 years ago. Is it better to own a house - sure for lifestyle reasons. But be aware that you are many times "flushing money" down the toilet for home repairs and property insurance just as much as the renter is supposed "flushing money" down the drain on rent every month. And it's really not that lucrative an investment except in a hot market with low interest rates. One recession and/or 10% mortgage rates will expose the problems with buying homes at current price levels as an "investment".
fframe38, Thanks for providing some perspective from someone who's lived on both sides of the ffence.
Oh really? If, as you say, "your goal is strictly to maximize the return on your investment, regardless of lifestyle" then I'm sure I can come up with a much cheaper way to live then either of your two choices. An honest financial analysis would pick the lifestyle you want and then determine whether renting or owning is better. Comparing owning a condo to renting an apt or compare owning a house to renting the same house. You have not provided any valid reason why your refuse to do an apples to apples comparison.
Okay -- I'll work up a comparison of living in an apt vs living in a condo, since those are basically the same lifestyle and that is the lifestyle I want. Agreed? I'll post it later this weekend when I have time (since, due to my lifestyle, I won't be busy mowing the lawn, fixing the faucets, etc).