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Rent vs. Buy

intothepolis said:
Look, I'm speaking from a common man's perspective. That's the way it's been in my family and for my friends and neighbors. It's impossible to sum up every single persons experience in both generations. But, I think what I wrote is pretty spot on for most people in my situation. If you think I'm wrong explain why. I'm all ears.
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Again it's all about who you know. You just summed it up.

I got lucky and got hired at a great company through my network and I've met some great people.

I'm a firm believer that your income/net worth is directly related to the people you are surrounded with.

The more I was around my friends with nothing the more of nothing I had.
 
Vetvito said:
Again it's all about who you know. You just summed it up.

I got lucky and got hired at a great company through my network and I've met some great people.

I'm a firm believer that your income/net worth is directly related to the people you are surrounded with.

The more I was around my friends with nothing the more of nothing I had.
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You really aren't following the logic are you? Let me break this down for you:

Now: It's about who you know
Then: It was not about who you know

Now = Harder than Then
 
intothepolis said:
You really aren't following the logic are you? Let me break this down for you:

Now: It's about who you know
Then: It was not about who you know

Now = Harder than Then
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Logic?

No it's always been this way. Now it's just common knowledge.

You can say rules and regulations have changed but it's always been about who you know.
 
intothepolis said:
You really aren't following the logic are you? Let me break this down for you:

Now: It's about who you know
Then: It was not about who you know

Now = Harder than Then
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Vetvito said:
Logic?

No it's always been this way. Now it's just common knowledge.

You can say rules and regulations have changed but it's always been about who you know.
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you are both correct... It IS harder now and it always has been about who you know
 
intothepolis said:
If it's ALWAYS been about who you know, why did both of my parents get good jobs at large companies without knowing anybody on the inside?
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I didn't say it's always about who you know, I said it's always been about who you know. There are a few exceptions that prove the rule, but even then you don't really know what all goes or went on behind the scenes
 
Dagless said:
I'd never rent, I just feel the money goes nowhere.
But it all depends on what you want. Do you think you'll be moving a lot in the future? Are you one to settle down in one spot?
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You NEVER own. If you buy, you "rent" from the government.

Through property taxes, you'll have to "rebuy" the home every 40 years.

-t
 
intothepolis said:
The bottom line is I feel like renting would give me a better lifestyle in a nicer place. Buying just might not be for someone in my situation and living where I do. What do you guys think? Thank you for any advice, I appreciate it all.
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Your gut feeling is absolutely right. Renting is the right choice.

It's amazing that many Americans still haven't gotten over the obsession of "owning" a house. Let's break down some myths about "home ownership".

1) Homes are NOT an investment anymore. And they won't be for a looooong time. That boat has sailed 7 years ago. Forget about "investing" in a home. It's just not happening. Just like a car is not an investment. Both are necessities of life. If you can rent a nice place, do it, and pay down debt rather than a home down payment.

2) Don't let anyone fool you with "mortgage rates are cheap - buy while it lasts".
Mortgage rates and home prices are intrinsically tied together. The very reason the government / Fed tries to keep mortgage rates low is to prop up the housing markets (i.e. housing prices). The ONLY effect of rising mortgage rates is that homes will become cheaper. So you don't lose out by waiting.

3) Buying a home will almost always make you buy more home / space than you need.
See, for some weird reason, people will NOT rent a 4 bedroom apartment when they are single, but they would buy a 4 bedroom house. I just doesn't make sense.
The MAIN mistake for many people in the housing market is that they bought more house than they needed and could afford. Renting forces you to make a more conscious decision about how much space you want and need.

4) Deduction of interest expense of a mortgage is often cited as a "smart move".
But it's only smart if all other things are equal. If you get tempted to buy more home than you need, any deduction of interest expenses won't make up for the higher cost of owning that home. This goes back to point 3).

5) Renting gives you much more flexibility.
You're young, you haven't settled down, you want to pursue opportunities as they come along.
Owning a home will tie you down much more than renting. I know people that could not take advantage of great career opportunities because they simply can't sell their home w/o a loss, or because they are so emotionally tied to the concept of "not selling w/o a gain", and therefore, still wait for the market to rebound.

-t
 
I'm going to go a bit off topic here, but this thread has been heading this direction...

If you are interested in improving your finances read them all - Robert Kiyosaki, Dave Ramsey, Suze Orman, Larry Burkett, or even Ben Stine ("How to Ruin Your Financial Life" is a rather insightful and funny book). Once you read them all, then you can nitpick and decide who's advice best fits your style. Myself - I go with Dave Ramsey. The TMM works for me.

Is it harder to make a living now then 30-40 years ago? Maybe. But this is the hand we have been dealt and the world we live in. Deal with it. Want to do something about it? Build a business and start hiring people. Change other people's lives and you will be rewarded by it.

In this day and age, it is about who you know. Check out this interview on "Here and Now" with John Wilpers (This aired today, BTW). If I remember right, he said 70% of all resumes are never read - they are scanned and digitally searched. The only way through that kind of system is to know how to wade through it...or know someone who can walk you around it.

I didn't know it at the time but I got fast tracked to one interview because the guy doing the hiring was in my program in college with me. He knew me and my reputation. And let me tell you, an interview is a lot easier when you know the person sitting across the table from you - and they know you.
 
Dagless said:
I'd never rent, I just feel the money goes nowhere.
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That, my friend, right there is completely and utterly untrue. Here is a little story for you.

I listened to my uncle who was in real estate and bought an apartment right after receiving my first full-time job after college. And it was the absolutely dumbest thing I've ever done. That was in 2005 near Boston which is also very expensive. I paid quite a bit of money for a 1-bedroom apartment about 35 mins away from Boston.

For the first few years I struggled badly because my jobs weren't paying enough for me to afford this place and I had to economize on everything. The mortgage rates back then were high too. After get laid off at one point I went to a few interviews in Boston and realized that I couldn't commute there because morning traffic would make my commute over 1 hour and so would Commuter Rail train. Spending 2.5 hours commuting per day is not my idea of fun. So I had to look for jobs accessible from my place only with little flexibility which limited my choices significantly.

Then recession hit. My place plunked down in value like an out-of-warranty 7-series BMW. I was able to refinance a couple of times but recently the appraisal has been so low that despite paying religiously and virtually never being late on payments I cannot do a refi using the good rates of today. So I'm stuck paying more for a place that's worth fiddlesticks. I cannot sell it because I would have to pay ON TOP of what I still owe after paying for almost 8 years.

On top of that, my place got robbed in a major way in 2010 as well as few other interesting things happening around here. And this is not a very criminally-known neighborhood, mind you! The taxes keep going up and so does the condo fee. The condo association is by far more preoccupied with making sure the building has some extra flowers and grass rather than good security. After about 8 break-ins (including mine) they finally installed some security cameras that promptly got stolen too. Car break-ins also happen a few times a year and no outside cameras have been installed so far. Not to mention fun things like $25 condo tickets for not removing the snow off your car in time!

Of course, just because I had a lousy experience doesn't mean everyone would. But to answer the statement in quotes - if I rented the same place all these years, not only would I have far more cash right now, I would have more freedom to get out and I wouldn't be stuck with this pathetic place.

OP, I would not even consider buying if I was in your shoes. It sounds like you're not ready for it. Rent as cheap as you can, save money. You can always buy later. If there is one thing I learned it's this: do NOT buy until you're absolutely positively ready to settle and don't plan on moving anywhere for a looooong time. At least 10 years.
 
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I'm 25 years old and have been out of college and employed for two years.

When I graduated from school (BBA Accounting 2009, MAcc 2010), I moved into the apartment that my wife (married literally the day after graduation) was already renting in the town I was going to be working in (already had a job).

We rented that apartment together for 12 months (she was there six months before me, so 18 months total). In that 12 months, we saved the money for 10% down on our house, in addition to having a good emergency fund (eight months in our case).

In December 2011, we bought our house. Our monthly expenses increased roughly $500 per month. In the year that we've lived here, we've been fortunate enough to not have any large expenses come up that have surprised us.

I do like the idea of knowing that we are on the way to being homeowners, and will hopefully do so in a relatively short term (comparable to most, anyways).

Now, I don't know if you have a significant other (you didn't mention). If you don't, then renting should be your only consideration. Having two incomes makes a significant difference in your ability to have a luxury such as your own home.

Assuming that you are single, renting will provide the flexibility and savings that a young man or woman needs in his or her time right out of school. That's exactly why we did it. We are both young people (25, as I mentioned), and you never know what life changes might be made in that time.

I would encourage you to rent for NO LESS THAN twelve months and then re-evaluate your financial situation. There will be people who will only evaluate things in the short term (which you should never do for your finances) and tell you that you are throwing money away.

You're not.

You're paying the interest that you'd normally pay on a mortgage (75% of my payments this year went to interest [aside from the special extra principal reductions]), and then you're paying a small premium for FLEXIBILITY.

tl;dr - RENT
 
gsugolfer said:
I'm 25 years old and have been out of college and employed for two years.

When I graduated from school (BBA Accounting 2009, MAcc 2010), I moved into the apartment that my wife (married literally the day after graduation) was already renting in the town I was going to be working in (already had a job).

We rented that apartment together for 12 months (she was there six months before me, so 18 months total). In that 12 months, we saved the money for 10% down on our house, in addition to having a good emergency fund (eight months in our case).

In December 2011, we bought our house. Our monthly expenses increased roughly $500 per month. In the year that we've lived here, we've been fortunate enough to not have any large expenses come up that have surprised us.

I do like the idea of knowing that we are on the way to being homeowners, and will hopefully do so in a relatively short term (comparable to most, anyways).

Now, I don't know if you have a significant other (you didn't mention). If you don't, then renting should be your only consideration. Having two incomes makes a significant difference in your ability to have a luxury such as your own home.

Assuming that you are single, renting will provide the flexibility and savings that a young man or woman needs in his or her time right out of school. That's exactly why we did it. We are both young people (25, as I mentioned), and you never know what life changes might be made in that time.

I would encourage you to rent for NO LESS THAN twelve months and then re-evaluate your financial situation. There will be people who will only evaluate things in the short term (which you should never do for your finances) and tell you that you are throwing money away.

You're not.

You're paying the interest that you'd normally pay on a mortgage (75% of my payments this year went to interest [aside from the special extra principal reductions]), and then you're paying a small premium for FLEXIBILITY.

tl;dr - RENT
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How much was that apartment you two rented before buying a house? Just curious.
 
gsugolfer said:
Apartment was $515 for a 2BR/1.5BA, 1100 sqft

Mortgage (with escrow) is ~$950 for a 3BR/3BA, 2600 sqft

That's for a thirty year mortgage at 4.25%
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Amazing. I'm definitely living in the wrong state. I'm paying 1225 right now for a studio that was built 30 years ago. They raise the rent 25-50 dollars every year I re sign the lease. No amenities. No covered parking. No in unit laundry. It's tough for me to move though. I grew up here. My entire family lives here. But, they bought homes 30 years ago when they were still affordable. My generation better learn how to re locate. I think that's going to be one of the key elements for my generation. Mobility, and not the upward kind.
 
intothepolis said:
Amazing. I'm definitely living in the wrong state. I'm paying 1225 right now for a studio that was built 30 years ago. They raise the rent 25-50 dollars every year I re sign the lease. No amenities. No covered parking. No in unit laundry.
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Our apartment sounds just like yours (except cheaper). It wasn't anything nice at all.

Either way, if your living arrangements are that expensive, your situation isn't really that comparable to mine.

The fundamental message is still the same, though. Yes, your rent is pretty expensive, but if you were to buy a house at that $450k price point mentioned earlier in this thread (I think anyways, I might have made that number up), you would see a $1,000 increase with just P&I. Not to mention taxes and insurance.
 
gsugolfer said:
Our apartment sounds just like yours (except cheaper). It wasn't anything nice at all.

Either way, if your living arrangements are that expensive, your situation isn't really that comparable to mine.

The fundamental message is still the same, though. Yes, your rent is pretty expensive, but if you were to buy a house at that $450k price point mentioned earlier in this thread (I think anyways, I might have made that number up), you would see a $1,000 increase with just P&I. Not to mention taxes and insurance.
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I better start looking for a wife. I could use that second income. Haha. But, then there's always that threat of child support and alimony...
 
intothepolis said:
Amazing. I'm definitely living in the wrong state. I'm paying 1225 right now for a studio that was built 30 years ago. They raise the rent 25-50 dollars every year I re sign the lease. No amenities. No covered parking. No in unit laundry. It's tough for me to move though. I grew up here. My entire family lives here. But, they bought homes 30 years ago when they were still affordable. My generation better learn how to re locate. I think that's going to be one of the key elements for my generation. Mobility, and not the upward kind.
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Sounds like you to move into a different apartment with a roommate or just live at home for 6-12-however many months you can stomach.

6 months at $1,225 is already $7,350 saved. Maybe minus a few hundred if you buy your food or parents want a minor rent payment. That's an insane amount of money saved.

I'm just 24, so I know it's tough to come to those terms. I graduated in Chicago May 2011. I lived in a cheap neighborhood for school, but with my spiffy salaried gig after graduation, I wanted to move to Lincoln Park because it was a cool neighborhood. Paying $825/month for a studio compared to ~$500/month where I previously living with roommates was dumb, but at the time I felt like I had to do it. I could have saved an extra $3,000 that year.

And I didn't read the whole thread, but if rent is that expensive where you live, buying is going to be well out of your means on that salary. Heck, renting at that rate seems almost unbearable. Your rent is 35% (fringe acceptable) to 50% of your predicted gross income. My previous rent was 28% and I had no car/gas/insurance payment at the time and it was barely bearable with repaying my 30k loan debt and living fairly modestly.
 
malman89 said:
Sounds like you to move into a different apartment with a roommate or just live at home for 6-12-however many months you can stomach.

6 months at $1,225 is already $7,350 saved. Maybe minus a few hundred if you buy your food or parents want a minor rent payment. That's an insane amount of money saved.

I'm just 24, so I know it's tough to come to those terms. I graduated in Chicago May 2011. I lived in a cheap neighborhood for school, but with my spiffy salaried gig after graduation, I wanted to move to Lincoln Park because it was a cool neighborhood. Paying $825/month for a studio compared to ~$500/month where I previously living with roommates was dumb, but at the time I felt like I had to do it. I could have saved an extra $3,000 that year.

And I didn't read the whole thread, but if rent is that expensive where you live, buying is going to be well out of your means on that salary. Heck, renting at that rate seems almost unbearable. Your rent is 35% (fringe acceptable) to 50% of your predicted gross income. My previous rent was 28% and I had no car/gas/insurance payment at the time and it was barely bearable with repaying my 30k loan debt and living fairly modestly.
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Maybe I'm shooting low on my first salary. I have no idea what amount I'll be offered. I'm coming from a top ten school though. Maybe I can land a job for 50-60k a year but I doubt it. Not in this economy and not with my major. I'd have to move to D.C.
 
intothepolis said:
Maybe I'm shooting low on my first salary. I have no idea what amount I'll be offered. I'm coming from a top ten school though. Maybe I can land a job for 50-60k a year but I doubt it. Not in this economy and not with my major. I'd have to move to D.C.
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What was your major, if you don't mind me asking?

(if you do, just ignore me :cool: )
 
turtle777 said:
Your gut feeling is absolutely right. Renting is the right choice.
...
1) Homes are NOT an investment anymore. ...
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Agree: I've heard it stated something like.. A home is not a cash machine, and too many people treated it as such. It is a place you live in. Period.
turtle777 said:
2) Don't let anyone fool you with "mortgage rates are cheap - buy while it lasts"...
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As an absolute statement, I don't agree. If someone is looking a property as an investment, and knows what they are doing, today's mortgage rates are in fact a good thing. But - it does not apply to OP's situation, so in that sense I agree.
turtle777 said:
3) Buying a home will almost always make you buy more home / space than you need....
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It is funny how that happens. Which also means that there is an opportunity here... I'm one of those exceptions. Way way back I bought the cheapest smallest house I could find in Windsor Ontario, right next to the cemetery. And by small, I mean it used to be a cottage. But it got me into the market with a mortgage that was so affordable I was maxing out the privilege payments option. And that built-up equity lead to slightly larger house, and then a larger one. Because everybody seems to want a big house, the older smaller ones can be very very affordable - especially in a market like this. Learning how to fix it up yourself - sweat equity - can lead to big gains.
turtle777 said:
...
Owning a home will tie you down much more than renting. ...
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Yep. After years of owning, and having the cash in the bank... I rented for nearly year because I wasn't sure I would be sticking around. Even though I did end up sticking around, I'm still glad I rented since I didn't know the city well enough to know where I wanted to live.
turtle777 said:
-t
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OP: You are already in debt. Live in a small cheap apartment, and live cheap until that debt is retired. Put together a downpayment - and then buy the smallest and cheapest house you can buy, in a neighbourhood you like. Look for the rundown home in not so rundown neighbourhood. Fix it up yourself... you can learn how ... it's not so hard. The time you put in will pay for itself. Either when you put down roots there and make new friends.. or when you sell and you get paid for the time you put in.
 
gsugolfer said:
What was your major, if you don't mind me asking?

(if you do, just ignore me :cool: )
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Political Science. Most of the job postings on usajobs all want years of experience so I'm not sure what to do. I already took the LSAT so I might just end up in law school. If I do that though I will turn my 30 grand in debt into 180 grand. So, I'll beginning my career with 180 grand in debt and an uncertain job outlook. What would you advise?
 
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intothepolis said:
Amazing. I'm definitely living in the wrong state. I'm paying 1225 right now for a studio that was built 30 years ago. They raise the rent 25-50 dollars every year I re sign the lease. No amenities. No covered parking. No in unit laundry. It's tough for me to move though. I grew up here. My entire family lives here. But, they bought homes 30 years ago when they were still affordable. My generation better learn how to re locate. I think that's going to be one of the key elements for my generation. Mobility, and not the upward kind.
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The first apartment i lived in, which i lived in until i moved into my house was about $750 a month for a 2 bedroom, 1.5 bath, water paid for, 2 parking spots out back, and a basement that had a washer and dryer provided.


I borrowed $110,000 when i purchased my house. I pay right around $950 a month in mortgage and property tax. It is a 3 bedroom, 2 bath, 1700 sqft, 2 car garage home. The house is all electric and the average bill runs around $150. Cable and internet is $115. Water build comes every 3 months and is around the $150 mark. I have 2 room mates that pay me a fixed amount each month. There 2 checks end up paying a little over half the above mentioned costs.
 
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