Is owning a home mostly a bad thing?

Is owning a home a bad investment for most?

  • Yes.

    Votes: 40 33.1%

  • No.

    Votes: 66 54.5%

  • I don't know.

    Votes: 11 9.1%

  • I don't care.

    Votes: 4 3.3%
  • Total voters
    121
Quote from Daal:

In theory renting is more expensive than buying because the landlord is essentially in the same position as a owner but also selling a service(all the costs of maintaining his property plus some kind of profit factor to compensate for his work).

So the guy from the video is not correct when he talks about the costs of fixing the property, taxes, insurance. Those things tend to be embedded in the rent price because landlords are not in the business of losing money and over the long-run will show a long-run profit(I assume the buying and renting RE is not like the Airline business which doesn't show a long-run profit, but that seems a safe bet).

More...

That's not entirely accurate. An analogy is insurance. Buying automobile insurance is going to be a negative stream and a "bad investment" unless the insured gets into an accident. Then the payments to the insurance could end up being a tiny percentage of the costs of that accident.

Renting is similar. In theory, a landlord owns multiple properties and can spread those year to year costs amongst all their tenants, therefore reducing the expense paid by each renter. You don't have that luxury when owning. Once you have to pay a very large sum of money for that unexpected disaster, there is no spreading of that cost to minimize the out of pocket expense.

Renting will almost always allow you to get more home for the same price as purchasing because of those costs that are spread among many people.

It's economies of scale. They apply to landlords as well as companies :)
 
Quote from Trader666:

Actually, people keep comparing buying to renting. And since everyone needs a place to live, either you pay down your mortgage or you pay down your landlord's. You can't live in a stock or bond.
More...

That's exactly the point right there. Neither renting or buying should be considered an investment. It's a necessity for living. It's these thoughts that have convinced many people to make bad decisions in buying a home because they are convinced it is an "investment". The only advantage that one should consider for purchasing a home is to have their privacy in owning their own home. Beyond that, trying to pass it off as some great investment whereas renting supposedly isn't is an illogical argument.
 
well around here renting is definitely better financially. for example,

a $1 million home would rent for about $43,000 per year.

on the other hand if you bought the home outright, you are "paying" an annual opportunity cost of $100k (i can easily make 10% on the $1m). then add the property tax, maintenance, insurance and so forth, and the annual ownership cost comes out to ~$113k.

i'm sure in some regions like texas the numbers are very different, but at least in my area renting is cheaper
 
Quote from tradestrong:

That's not entirely accurate. An analogy is insurance. Buying automobile insurance is going to be a negative stream and a "bad investment" unless the insured gets into an accident. Then the payments to the insurance could end up being a tiny percentage of the costs of that accident.
More...

I dont believe thats relevant. What matters is what happens on net, I would be shocked if the insurance industry were a net loser of money in the long-run, they probably make money, that money must be coming from somewhere and thats the clients. Yes, you might get lucky and get a net positive return from that but on net the average client will lose money using it(this doesnt mean its a bad idea, just that it will cost money)
 
Folks there is no one answer.

From a purely financial perspective it depends on the specifics of each situation. From a quality of life point of view or other point of view it is the same thing.

Given this, it is a fact that many rental homes are available right now (in markets I am familiar with) at just a fraction of their mortgage/upkeep/propertytax costs.

That is an artifact of this particular era and is not a universal truth.
 
So people in your area are renting houses for $43K/year that cost them $113K/year? I don't think so.

Quote from blackjack007:

well around here renting is definitely better financially. for example,

a $1 million home would rent for about $43,000 per year.

on the other hand if you bought the home outright, you are "paying" an annual opportunity cost of $100k (i can easily make 10% on the $1m). then add the property tax, maintenance, insurance and so forth, and the annual ownership cost comes out to ~$113k.

i'm sure in some regions like texas the numbers are very different, but at least in my area renting is cheaper
More...
 
What's an artifact of this era is houses selling at a fraction of what they did a few years ago and the HAI at a generational low. What markets are you talking about?
Quote from 1prometheus:

Given this, it is a fact that many rental homes are available right now (in markets I am familiar with) at just a fraction of their mortgage/upkeep/propertytax costs.

That is an artifact of this particular era and is not a universal truth.
More...
 
However you slice it. owning a home is going to get more expensive. Have you seen the new lead safety regulations for contractors. Plumber, electricians, painters anyone who works in your home has to be certified.

Between asbestos, lead, waste disposal and bulding permits (prices are a % of the value of work.) liability insurance. Every home is a mini brownfield to be regulated by the EPA and assorted permit nazis.

Of course this only matters for those who follow the law, unlike Detroit, where they bulldoze a house and bury the remains in the basement.
 
Well I think the arguments for ownership here have been pretty weak. Mostly just harping on the issue of paying rent, even as it has been explained repeatedly that there are numerous ownership costs that can offset that. And mostly ignoring the other great points that were brought up in the video. Granted that ownership is better in particular markets and particular circumstances. But if someone can't put more thought into it than "but you're throwing your rent awayyy!", then I would have to say that doesn't sound very rational.
 
You must log in or register to reply here.
Back
Top