My wife and I are debating whether we should buy a house / condo /
townhome or just rent for a longer period..

We have been renting for over 5 years now.. and getting close to being
bored living in apartments..


BUT, when I do calculations, it never seems to make financial sense to
buy a house..


On a ~ 200k house inside / close to the loop, one pays ~ 3k / yr or
higher in taxes plus at around 6% mortgage, the interest alone is ~
$12k / yr. So an expense of $ 15k per year.. (I am keeping the
principal repayment out of this as this is applied towards reducing the

loan amount and so not an expense)


Minus.. the interest deduction from one's income.. Roughly $4k saving
(at a 33% tax bracket)


So recurring expenses of about $ 11k. ($15k minus $4k) (plus
maintenance costs if in a condo/ townhome..et al)


I am keeping the one time closing cost out of this for now..


So in effect.. Rougly, I am talking about paying $1000 per month even
when I own a home..


I agree that this comes with the potential benefit of appreciation..
but historical prices in the Houston area has not shown any
appreciation for a while.. loong while.. and the market in Houston is
pretty much flat...


If I rent, I will be paying $1k / month towards rent..
If I own a home, I will be paying $1k / month towards interest /
property taxes..


Now if I add in the one time closing costs into the picture, ~ $15k..
then it does not make sense for me buy a home unless I plan to stay
there for at least 3 - 5 years..


So.. I am requesting advise from all existing homeowners..


Why not rent a great place for $1.5k / month with all amenities taken
care of by the apartment folks rather than own and pay more?


I appreciate any and all comments.. Thank you..


Tom

The interest and property taxes are tax deductible. Your rent $$$ is
just plain gone. After 30+ years in apt. you own zilch. A house you
will own and then you only owe taxes until you die. If housing prices
surce then you have a great deal of equity to cash in on when selling.
Plus owning a house is incredible. /renting sux.
Tom wrote:
My wife and I are debating whether we should buy a house / condo /
townhome or just rent for a longer period..

We have been renting for over 5 years now.. and getting close to being
bored living in apartments..


BUT, when I do calculations, it never seems to make financial sense to
buy a house..


On a ~ 200k house inside / close to the loop, one pays ~ 3k / yr or
higher in taxes plus at around 6% mortgage, the interest alone is ~
$12k / yr. So an expense of $ 15k per year.. (I am keeping the
principal repayment out of this as this is applied towards reducing the

loan amount and so not an expense)


Minus.. the interest deduction from one's income.. Roughly $4k saving
(at a 33% tax bracket)


So recurring expenses of about $ 11k. ($15k minus $4k) (plus
maintenance costs if in a condo/ townhome..et al)


I am keeping the one time closing cost out of this for now..


So in effect.. Rougly, I am talking about paying $1000 per month even
when I own a home..


I agree that this comes with the potential benefit of appreciation..
but historical prices in the Houston area has not shown any
appreciation for a while.. loong while.. and the market in Houston is
pretty much flat...


If I rent, I will be paying $1k / month towards rent..
If I own a home, I will be paying $1k / month towards interest /
property taxes..


Now if I add in the one time closing costs into the picture, ~ $15k..
then it does not make sense for me buy a home unless I plan to stay
there for at least 3 - 5 years..


So.. I am requesting advise from all existing homeowners..


Why not rent a great place for $1.5k / month with all amenities taken
care of by the apartment folks rather than own and pay more?


I appreciate any and all comments.. Thank you..


Tom

"Tom" writes:

On a ~ 200k house inside / close to the loop, one pays ~ 3k / yr or
higher in taxes plus at around 6% mortgage, the interest alone is ~
$12k / yr. So an expense of $ 15k per year.. (I am keeping the
principal repayment out of this as this is applied towards reducing the
loan amount and so not an expense)

Minus.. the interest deduction from one's income.. Roughly $4k saving
(at a 33% tax bracket)


So recurring expenses of about $ 11k. ($15k minus $4k) (plus
maintenance costs if in a condo/ townhome..et al)


I am keeping the one time closing cost out of this for now..

So in effect.. Rougly, I am talking about paying $1000 per month even
when I own a home..

Yup.

I agree that this comes with the potential benefit of appreciation..
but historical prices in the Houston area has not shown any
appreciation for a while.. loong while.. and the market in Houston is
pretty much flat...

This is important.

Why not rent a great place for $1.5k / month with all amenities taken
care of by the apartment folks rather than own and pay more?

You're in a strange area if appreciation isn't happening. In most
other places in the country, appreciation has been steaming along at
very very happy rates, and the benefit of appreciation is signficant.

The other part of the equation is what if any lifestyle change does
owning afford ya. If you are comparing renting an apartment vs
owning a similarl size/configuration condo, that too nils out. But
there's also the benefits of living where you're surrounded by folks
who own their places vs just renting. In general, they tend to be
better neighbors and take care of their places better. BUt if it's
attached housing with a condo association, you don't see much of that
anyway.

You seem to have a pretty good handle o nthe finances, and if it
doesn't make finanncial sense, why bother. However, I'd challenge
whether prices really have remained flat, and you also have to see
what the market might do in that location in the future. If there's
slim/no chance of appreciation starting to happen, yeah, it doesn't
seem like you should be in any hurry to buy.


--
Todd H.
http://www.toddh.net/

In article .com,
Tom wrote:

Now if I add in the one time closing costs into the picture, ~ $15k..
then it does not make sense for me buy a home unless I plan to stay
there for at least 3 - 5 years..


You answered your own question. Don't buy a home if you're not going
to be there even 4 years.


Dimitri

(D. Gerasimatos) writes:

Tom wrote:

Now if I add in the one time closing costs into the picture, ~ $15k..
then it does not make sense for me buy a home unless I plan to stay
there for at least 3 - 5 years..

You answered your own question. Don't buy a home if you're not going
to be there even 4 years.

Yup. Buying a home is a long-term commitment. 10+ years down the
road, your mortgage payments are going to remain the same as they are
today, and more and more of your monthly payment is going to go
towards principal (that's money for you) instead of interest (money
for the bank). Meanwhile, that some 10+ years down the road, not only
is all of your rent money still going down the drain, but you're
likely going to be paying significantly more rent than you are today
because of inflation.

The other reason to buy instead of rent, as others have pointed out,
is because of lifestyle issues. E.g., I bought my first home because
I was having problems finding a nice apartment that would take my two
cats. (It was a college town, so most of the rental housing was
geared towards student budgets rather than working professionals.) If
you want a house with a nice yard for your kids to play in, or if your
hobby is gardening or woodworking, or if you just want a place you can
decorate to your own tastes, you'll probably be a lot happier owning
your own home than in a rental.

-Sandra

In article .com, Tom says...

My wife and I are debating whether we should buy a house / condo /
townhome or just rent for a longer period..

We have been renting for over 5 years now.. and getting close to being
bored living in apartments..


BUT, when I do calculations, it never seems to make financial sense to
buy a house..


On a ~ 200k house inside / close to the loop, one pays ~ 3k / yr or
higher in taxes plus at around 6% mortgage, the interest alone is ~
$12k / yr. So an expense of $ 15k per year.. (I am keeping the
principal repayment out of this as this is applied towards reducing the

loan amount and so not an expense)


Minus.. the interest deduction from one's income.. Roughly $4k saving
(at a 33% tax bracket)


So recurring expenses of about $ 11k. ($15k minus $4k) (plus
maintenance costs if in a condo/ townhome..et al)


I am keeping the one time closing cost out of this for now..


So in effect.. Rougly, I am talking about paying $1000 per month even
when I own a home..


I agree that this comes with the potential benefit of appreciation..
but historical prices in the Houston area has not shown any
appreciation for a while.. loong while.. and the market in Houston is
pretty much flat...


If I rent, I will be paying $1k / month towards rent..
If I own a home, I will be paying $1k / month towards interest /
property taxes..


Now if I add in the one time closing costs into the picture, ~ $15k..
then it does not make sense for me buy a home unless I plan to stay
there for at least 3 - 5 years..


So.. I am requesting advise from all existing homeowners..


Why not rent a great place for $1.5k / month with all amenities taken
care of by the apartment folks rather than own and pay more?


I appreciate any and all comments.. Thank you..

Well, in the financials you need to take into account that you would be building
equity in a house, even if there is no market appreciation.

But an important factor here is non-financial - how satisfied you are with
apartment living vs. home ownership. How much do you value having fewer
respondibilities for apartment ownership vs. less control while living in
apartments. Also, quality of the environment regarding the people you deal with
daily. I bought my house at age 39, and I think it is generally quite true that
home owners have more vested in having decent relations with neighbors than
apartment dwellers. And things like, how do you feel about repairs and
improvements being done at the landlord's timing and quality then seeing the
increase in rent, vs. doing repairs and improvements on your own timing and
priority and quality but paying chunks out of pocket.

Is this a disagreement in your marriage? If so, what are the chances of happy
settlement if you continue to rent vs. continuing to buy. If certain
responsibilities of homeownership (upkeep, mowing) are unpleasant to you, can
you hire them out.

You need to look at the whole picture. Remember, money is to help make your
life happy and pleasant. Don't put the cart before the horse and make your life
unhappy or unpleasant for the sake of money. This applies to some people if
they were to buy; and it applies to some people if they were to continue to
rent. Only you know which category you're in.

Cheers,
Banty


--

Why not rent a great place for $1.5k / month with all amenities taken
care of by the apartment folks rather than own and pay more?

With a fixed rate mortgage, your payments never go up. The only thing that
will go up is your property taxes. If you take out a 15 year mortgage, then
your interest rate will be lower, and your yearly interest expense will
decrease much faster. Over 5 years, maybe even 3, you'll have built up a
nice chunk of equity.

Rents usually go up from year to year. Not all landlords are responsive or
responsible.

If you want to move in less than 3 years, renting is probably your best
option.

S

Renting is not necessarily throwing your money away. You tend to have
fewer expenses with renting, especially unexpected repairs and
maintenance, plus you have more mobility. You can even get some
landlords to include a clause that would allow you to break the lease
with notice, if you get transfered or buy a house. I have had these
clauses in nearly every lease I've had. I've also owned homes.
Sometimes owning makes more sense but not always.

If you read news from around the country about whether or not there's a
housing bubble you get mixed results, depending on what the source
would like reality to be. I look around and see that homes stopped
selling quickly in my area in the fall of 2005. Builder's model homes
that had waiting lists suddenly weren't selling. Prices have fallen as
builders and other sellers try to sell. Investors are leaving markets
that are falling, and going to places where it's steady and relatively
low priced, or still rising. You have to evaluate the prices where you
are considering buying right now, and the trends. If you see prices
are still artificially high don't buy.

Also if you plan on moving in the next few years, or think you may HAVE
to move, do not buy. Being stuck owning property if you have to move
is finacially very difficult.

Too many people these days view a house as an investment instead of a
place to live, and/or let their emotions about the "dream of
homeownership" cloud their vision. If you are sick of
apartments--something I understand 100%!--but do not want to buy, then
rent a decent house. A lot of what makes people leap into buying when
it's not really wise is that "dream of homeownership" crap. The worst
is when they are talked into taking out risky mortgages on houses they
really can't afford, in artificlally inflated markets, then the prices
start to go down and they're screwed.

Over any sort of long term, the stock market has appreciated
more than residential property values have. In theory,
you're better off renting for cheap and putting the money
you saved into the market -- but it's riskier. (Some would
say buying a house right now is also risky due to the bubble,
but historically this has not panned out.)

The answer, I think, is to diversify. If you can buy a house,
and also keep some money in other investments so that your overall
investments look balanced, then the house is a good thing.

Steve

"Tom" wrote in message
oups.com...

We have been renting for over 5 years now.. and getting close to being
bored living in apartments..

BUT, when I do calculations, it never seems to make financial sense to
buy a house..

Over the long term, it is hard to understand how it could cost your more to
own a house than to rent the same house from a landlord. After all, the
landlord has the same expenses you do, and wants to make a profit as well.

Moreover, there is usually a wider variety available for sale than for
rental, and you have more latitude in changing a house you own to make it
what you want than you do with one you rent.

However, the transaction costs for buying are much higher than for renting,
so you win only if you stay in one place for long enough to make back the
diference.

So if you're planning to move after a few years, and you can find something
you like available for rental, you're probably better off renting. If, on
the other hand, you intend to stay for more than a few years, or you want to
remodel before (or after) you move in, or you can't find rental property you
like, you should buy.

In article , Andrew
Koenig says...

"Tom" wrote in message
roups.com...

We have been renting for over 5 years now.. and getting close to being
bored living in apartments..

BUT, when I do calculations, it never seems to make financial sense to
buy a house..

Over the long term, it is hard to understand how it could cost your more to
own a house than to rent the same house from a landlord. After all, the
landlord has the same expenses you do, and wants to make a profit as well.

Moreover, there is usually a wider variety available for sale than for
rental, and you have more latitude in changing a house you own to make it
what you want than you do with one you rent.

...which is exactly where the delta between renting and owning may go (financial
deltas).

IMO and IME, the landlord will just maintain the property, and only do what
improvements are necessary for his place to look good to whatever population he
draws renters from. A homeowner may just barely keep the place up and make
whatever improvements may be needed for sale in whatever market he finds at that
point. Then, of course, the landlord would have been charging for profit over
that point. OR - the homeowner may have more expectations and spend more.

So, while that latitude *is* a big advantage of homeownership, depending on
one's skills and time available it may end up costing a lot compared to renting
over all those years.

Again, it's a matter of tradeoffs and what one wants.

A lot really depends on the housing market and stock. Around here, you spend
$$$$$ on BIG honkin' new construction houses, or $$$$ on necessary updates of
smaller older homes. Hardly any modest, decent, recent construction to be
found. So you're either sinking a lot into a McMansion or putting new furnaces
in and roofs on an older house (after swearing you would find a house that
didn't need that but find that most houses needed something). At least that's
what I found 12 years ago, and in a really good buyer's market. Tha's why
around here a lot of folks still rent.

Banty


--

"Tom" wrote in message
oups.com...
My wife and I are debating whether we should buy a house / condo /
townhome or just rent for a longer period..

We have been renting for over 5 years now.. and getting close to being
bored living in apartments..


BUT, when I do calculations, it never seems to make financial sense to
buy a house..

If your not planning on staying in the same place for an extended time,
closing costs and the uncertainty of the market would seem to favor renting.
Over the long term, if you're comparing the cost of buying versus renting
COMPARABLE houses, buying would make more sense because you're putting the
landlord's profit in your pocket. If your satisfied with a 1000 sq ft
apartment and considering purchasing a 2000 sq ft house the math gets more
complicated. In addition to the taxes and interest that you mentioned,
there are also higher insurance, higher utility bills, repair and
maintenance costs, initial furnishings, etc. And, while the home will
appreciate and mortgage payments are fixed, taxes, insurance, utilities and
maintenance expenses will continue to increase with inflation just like rent
while the mortgage interest deduction will drop as the mortgage is paid off.
I concluded that, IF I invested the extra monthly expense that a house would
require and continued to rent the smaller apartment, at the end of 30 years
my investment would equal the equity that I would have had in the house.
So, to me, the finances are a wash and you're really just looking at the
life style advantages (and extra upkeep effort) of a house versus the
flexibility of renting and having cash instead of property. For right now,
I'm happy with the flexibility of renting (and wishing I had bought while
interest rates and home prices were still at minimum ).

One error in Tom's financial calculation is that he only factored in
the deductibility of interest. Property taxes are also deductible, so
the tax savings at 33% would actually be $4,950, which brings the
interest/taxes portion of cost of ownership down to $838/mth.

I also think 15K in closing costs expenses is high for a 200K purchase.
You can get a mortgage with 0 points. Also, the closing costs need to
be seperated into really 2 groups. One are true extra expenses like
loan application fees, (points if any, which are also tax deductible),
title search, survey, legal fees, etc. The other group is things like
money that goes into escrow for paying property taxes, interest on the
loan till the first mortgage payment is due, etc. This second group is
not additional actual expenses, in the sense that you are already
calculating them in on you monthly costs of interest, taxes etc.

It's also important to realize that the interest carrying costs used in
Tom's calculation are for the full initial mortgage. As the mortgage
gets paid down, the interests costs decline, slowly at first, but
rapidly at the end, so that at the end of the mortgage, the interest
cost are zero.

I think beyond the cost factors above, the other main issues, which
have been discussed already a

How long you think you will be there. If you are likely to move in 2
years, then renting may be a better option, especially since housing
prices have appreciated sharply and could easily pull back in the short
term.

The fact that when it's your property, you can do what you want. If
you want to make improvements to it, say remodel a bathroom, you can.
And you will likely get some of it back when you sell, as the place
will be worth more.

And as others have pointed out, over the long term, real estate has
always appreciated. My home here in NJ is now worth over 2X what I
paid for it 10 years ago, and in this area that appreciation over the
last decade is typical.

There have been periods when property actually went down here, like the
late 80's. I know of condos that sold for $165K that a few years later
were selling for $120K. Now they are going for $330K. So, while the
overall trend has always been up, if you buy at the wrong time and have
to sell, you can still lose money.