Guy makes $160,000 and barely making it month to month...

[ironchef]

Wealthy people lease/rent their toys because they'd rather keep their capital invested. Wealthy people understand the value of debt and aren't scare of it like middle-class people are.

As for their home, wealthy people buy because few rentals are available in their price range. The majority of rental homes are in the median price range or lower. Plus, buying allows more flexibility with customization. The decision to buy a house is a practical decision more than a financial one.

I generally find high net worth people only borrow for investment or non depreciable assets. I don't know of too many high net worth folks renting or leasing their homes, cars, planes and boats unless it is for tax purposes.

Maybe the confusion is between high income vs high net worth. A lot of high income folks like professional athletes, celebrities, rent their "toys" because they want instant gratifications?

 

[Zzzz1]

Tons and tons and tons. In many countries. Maybe in the US there is too much of a negative stigma attached to renting. Not so in most other countries. By the way this was never under discussion. What I claimed was that renting over time does not cost more than house ownership. If you need the recognition by friends and family of owning then maybe you are a different story. The built equity in owning is already built into the comparison jfyi.

How many wealthy renters do you know?
I agree about flexibility, but owning RE is one of the best ways to accumulate wealth.
Longterm, the only thing a renter has to show for it are a bunch of canceled checks. The owner of RE has equity, and long term, no debt.

 

[Zzzz1]

You were the one who judged others, maybe start pointing fingers your way first, mate. Did you not talk about the honest Joe in derogatory ways and praised the whore mongerer?

Well don't cheat, if thats how you think you should live your life ( the boring morals way ) then do that, don't judge others.

 

[ironchef]

Tons and tons and tons. In many countries. Maybe in the US there is too much of a negative stigma attached to renting. Not so in most other countries. By the way this was never under discussion. What I claimed was that renting over time does not cost more than house ownership. If you need the recognition by friends and family of owning then maybe you are a different story. The built equity in owning is already built into the comparison jfyi.

The situation in the US is a little different from other countries:

In the US, it is not stigma but $. Gov policy and tax favor home owners vs renters. As a home owner, your property tax, mortgage interests are tax deductible but for renters, rents are not. As a result, after tax home ownerships often are cheaper than renting equivalent houses. In addition, most homeowners take out fixed interest mortgages so the monthly payments are fixed whereas rents escalate with inflation. On top of that, your mortgage payments include principal payments and homes generally are good hedge against inflation....

 

[Zzzz1]

That is total bollocks. Read up on the concept of moral hazard. It explains it all. Sure when you can design or abuse the system to let others shoulder your fuxxups then why not taking on tons of debt. After all what could go wrong. In the worst case either taxpayers or dumb investors will bail you out.

Wealthy people lease/rent their toys because they'd rather keep their capital invested. Wealthy people understand the value of debt and aren't scare of it like middle-class people are.

As for their home, wealthy people buy because few rentals are available in their price range. The majority of rental homes are in the median price range or lower. Plus, buying allows more flexibility with customization. The decision to buy a house is a practical decision more than a financial one.

 

[Zzzz1]

You conveniently omitted how profitable they are. Many are just scraping by, others are in multi year bankruptcy proceedings, a few others are doing OK. Why do you think all the Hongkong property forms are building and selling units rather than piling on tons of debt to rent out units? Same applies to most other markets. Renting out property on a commercial basis is a suckers' game. You got the facts stacked squarely against you.

My first reaction is to say that's whatever studies are showing this got to be wrong, at least on a global scale. There is a thriving rental industry and they obviously make money owning real estate and then renting it out. Intuitively, when choosing between a profitable global industry and a "study", I'd say the former is got to be right and the latter is full of shit.

Unless you gonna tell me that all of rental industry vig comes from the economy of scale as opposed to the actual convenience yield on the real estate?

 

[Zzzz1]

Ah since when? Property tax is deductible from what exactly? Income tax? That sounds very new to me. But I am all ears. Mortgage interest tax deductible? Care to elaborate? All else you said I agree with but does not change the fact that the bottom line looks very similar for either choice, even in the US according to quite a number of authors and researchers. At least that's what I remember from when I read up on the topic a while ago.

The situation in the US is a little different from other countries:

In the US, it is not stigma but $. Gov policy and tax favor home owners vs renters. As a home owner, your property tax, mortgage interests are tax deductible but for renters, rents are not. As a result, after tax home ownerships often are cheaper than renting equivalent houses. In addition, most homeowners take out fixed interest mortgages so the monthly payments are fixed whereas rents escalate with inflation. On top of that, your mortgage payments include principal payments and homes generally are good hedge against inflation....

 

[S2007S]

That is total nonsense. Longterm, renting comes to almost the exact cost than owning when you factor in property taxes, repairs and renovations, the giving up on the ability to stay flexible and move quickly when opportunities elsewhere arise. Not saying renting is better I am just saying many studies have shown that renting is not more costly than owning.

Have to disagree, a close friend of mine has 2 houses he bought over the last 35 years, the houses he purchased have increased in value over that time, one is paid off and the other I believe owes about $150,000, one is rented the other is a 2 family, the rents far exceed what he owes in mortgage and taxes, he clears more in rent in a year than what you would make on a million dollar portfolio in the s&p

Rents are insane right now. I purchased my place and living cheaper than if someone were to rent my place....if rents were to drop to where my mortgage and taxes are there would be what we call another crisis and probably a deep deep recession which means my costs stay pretty much flat as long as taxes don't rise too much while rents will continue to rise in the years to come....plus with housing prices jumping another 5% in the last year I can't complain....

 

[Turveyd]

You were the one who judged others, maybe start pointing fingers your way first, mate. Did you not talk about the honest Joe in derogatory ways and praised the whore mongerer?

The honest joe is a pot smoking and who knows what else druggie, which is why he's so screwed up. He treats his very gorgeous wife like shite to a lot of the time.

Not being interested in drugs, I'll take living wayyyy beyond his means guy 2, wasnt like his wife wasnt playing around

Everyone is screwed up in some way, me sex addict, a do it by the rules is still screwed up, later in life you'll realise there is no point and you should of had more fun.

 

[Turveyd]

Bought my house near the bottom 37k in the uk, currently 100k and going no where, highs 115k 2008 area, paying £320 per month, half renting similar house, if I bought the house today I'd be looking at £900 mortgage and likely losing money on the house.

Sell up soon, 100k leave in bank to pay rent, rent a 200k house for £900 per month, 10 years of free living and boiler breaks not my problem

Its only money, as long as Ive got food in my belly who cares!