"Renting Is Throwing Money Away" Is Completely False

Discussion in 'Career, Work, Finances and Education' started by Nick Delmacy, Dec 10, 2015.

  1. Nick Delmacy

    Nick Delmacy is a Verified MemberNick Delmacy Da Architect
    Site Founder The 10000 Daps Club

    Joined:
    Jun 28, 2013
    Messages:
    3,735
    Daps Received:
    12,822
    Gender:
    Male
    Location:
    Atlanta
    Orientation:
    Gay
    Dating:
    Not looking
    [​IMG]

    http://lifehacker.com/renting-is-throwing-money-away-is-completely-false-1747050568

    You might have heard the old adage “renting is throwing money away.” It seems like common sense. You don’t buy anything when you rent, but you keep to keep the house you buy. However, nothing could be further from the truth.

    As personal finance blog Afford Anything breaks down in massive, incredible detail, buying a home is a lot more complicated than “Rent, except you get to keep it.” Not only are there major additional costs that you’ll be paying for the rest of your life (like repairs, renovations, and property tax), but for the first several years of your mortgage, you’re barely even gaining any equity!

    Should you keep renting? Is renting better than buying? Or should you purchase a home? Is buying the better choice? Your answer is going to depend on a massive number of factors, including:

    • The local price-to-rent ratio.
    • How long you’ll live there.
    • Your alternative investment options.
    • Your assumptions about inflation and investment gains.
    • Maintenance, repair, insurance, property tax and capital expense costs.
    • The rate at which rents rise.
    • Et cetera, etc., etc.
    You get the picture. My goal is to impress upon you — once and for all — that this myth that “renting is throwing money away” is wrongheaded. In fact, it’s dangerous. It oversimplifies a life-changing, six-figure decision. It’s probably caused thousands (or millions) of people to buy houses they later regret.

    The entire piece is long, but should be mandatory reading before making the decision to buy versus rent. While it’s true that you’re buying an asset when you purchase a house, it’s an asset that barely keeps pace with inflation, and you lose the opportunity to make other investments. Not to mention, renting is underrated. Even if you think you’ve considered this topic top to bottom before, you’ll likely find some information you hadn’t thought of before (like a detailed explainer on the price-to-rent ratio) that you hadn’t thought of before.

    Renting is Throwing Money Away … Right? | Afford Anything via Rockstar Finance
     
    Desh92, grownman, Tyroc and 2 others dapped this.
  2. ControlledXaos

    Squad Veteran Most Valuable Player The 1000 Daps Club

    Age:
    46
    Joined:
    Aug 21, 2015
    Messages:
    2,543
    Daps Received:
    7,178
    Gender:
    Male
    Location:
    Atlanna
    Both have benefits and different levels of responsibility but... These folks out here talmbout "I'm renting because I may leave [Insert City X here]." but have been living in [City X] for 6 years and haven't even looked at employment at another city or saved enough to move away from where they are.... You may as well buy. Even if it's a one bedroom condo.

    Now if you just don't want to have the overhead of a mortgage, I totally understand. There's insurance, plumbing, appliances, yard work... That's all on you but you have a consistent payment and unless you have a money pit house/condo most people won't be replacing an hvac or stove every year. And you can always get used appliances on the low low.

    Also markets vary so buying in Atlanta may not be ideal but renting in Jackson, MS may not be ideal. There's a lot of variables to consider.
     
  3. Nick Delmacy

    Nick Delmacy is a Verified MemberNick Delmacy Da Architect
    Site Founder The 10000 Daps Club

    Joined:
    Jun 28, 2013
    Messages:
    3,735
    Daps Received:
    12,822
    Gender:
    Male
    Location:
    Atlanta
    Orientation:
    Gay
    Dating:
    Not looking
    Yeah I'm one of those people...been talking about moving out west for at at least a decade.

    But there's something symbolic about searching for and buying a house...its psychologically says, I'm planting me feet here permanently.

    Also, there's this story that was posted in the comments section to that article:

    "Just to share my own anecdote, I went back to renting after owning a home. The rent for the downtown Saint Paul location I want to be in is about $550 more than the mortgage for the townhouse in suburbs I owned. And I somehow have more money every month.

    The big reasons are 1) No association dues 2) MUCH lower utility costs (now I only pay electricity) 3) Maintenance is no longer in my hands 4) More public transportation options."


    Most people I know who own a home are not planning on leaving the city anytime soon (or ever)...or they are having a hard time selling their home so that they can eventually leave. Like you said though, It can go either way.
     
    redsai84, grownman and ControlledXaos dapped this.
  4. Dante

    Dante https://www.gofundme.com/qv7v5dw
    The Great Debater The 1000 Daps Club

    Age:
    40
    Joined:
    Sep 18, 2015
    Messages:
    874
    Daps Received:
    1,245
    Gender:
    Male
    Location:
    Baltimore, MD
    Orientation:
    Homosexual
    Dating:
    Single
    Yes, it's definitely a myth. The reason why people have always broadcasted the "Owning Over Renting" theory is to simply believe that with owning a property, it's yours, along with tax season perks. However, that is not always true. The reality is that unless you completely own the property by confirmation that the loan to the house is paid off, you are paying the bank just like you are paying a landlord or rental company. With for a lot of people who have a big loan against the property they "own" they will never see the day that it will be paid off, unless they win the lottery and nip the loan balance in the bud. When it comes to real estate, your financial gain is owning multiple properties that you can make an investment from, not just owning one property, specifically the one you reside in. Otherwise, you are paying someone to reside where you live at. If you miss a mortgage payment, the bank will throw you out just like if you don't pay your rent, the landlord/rental company will do the same.
     
    grownman dapped this.
  5. ControlledXaos

    Squad Veteran Most Valuable Player The 1000 Daps Club

    Age:
    46
    Joined:
    Aug 21, 2015
    Messages:
    2,543
    Daps Received:
    7,178
    Gender:
    Male
    Location:
    Atlanna
    If someone runs out and gets an equity loan borrowing against their house and then can't afford it, that's on them and their bad financial decision. The difference in missing a payment on a mortgage is that you ban theoretically in most cases, you'd have to miss three payments in a row before foreclosure procedures start. And likely, the bank is actually going to try to avoid foreclosing because it's harder for them to sell a foreclosure.

    The same can be said for owning a car versus leasing. If you decide to purchase the car, you are still not the owner until the loan is paid in full and the lien is clear. Very few people save money to buy a house outright or the 20 percent down for most mortgages to avoid paying PMI. But there are loan programs that help you own a home for less than the cost of renting like NACA. And NACA will make sure you can actually afford the home, maintenance, insurance and your other bills before they approve you.

    facebook title
     
    ColumbusGuy dapped this.
  6. OckyDub

    OckyDub is a Verified MemberOckyDub I gave the Loc'ness monstah about $3.50
    Site Founder The 10000 Daps Club

    Joined:
    Aug 12, 2015
    Messages:
    6,620
    Daps Received:
    14,935
    Gender:
    Male
    Location:
    The planet of Memory Corpses
    Orientation:
    Homosexual
    Dating:
    Married
    Could say a lot here but will say that White Wealth completely eclipses Black and Latino Wealth, with a large factor due to people of color not having nearly enough land or real estate.
     
    Discordant, ColumbusGuy, alton and 2 others dapped this.
  7. grownman

    The 100 Daps Club Supporter

    Joined:
    Oct 26, 2015
    Messages:
    935
    Daps Received:
    1,201
    Gender:
    Male
    Location:
    fl
    Orientation:
    Gay
    Dating:
    Not looking
    Wow. I will have to read that. I want to hear both sides. It's funny, that today me and my sister were talking about how we can't wait for our lease to be up.
     
  8. Nick Delmacy

    Nick Delmacy is a Verified MemberNick Delmacy Da Architect
    Site Founder The 10000 Daps Club

    Joined:
    Jun 28, 2013
    Messages:
    3,735
    Daps Received:
    12,822
    Gender:
    Male
    Location:
    Atlanta
    Orientation:
    Gay
    Dating:
    Not looking
    Yeah don't try to railroad my thread, lol. This article was mainly directed towards the majority of Americans who are not Billionaire Real Estate Tycoons...merely looking for a place to live. Even one of my best (gay) friends owns a home and rents another out (out of state in home town). He not only has to deal with repair and maintenance issues from afar, he has a roommate here in Atlanta. While he's not poor, he's never displayed or praised the supposed financial benefits that comes with owning real estate. He's always talking about being careful not spending too much money on things. Even many "baller" rappers and athletes are renting the homes they live in and the cars they drive...

    So it can go either way.
     
  9. TheEdge

    Squad Leader The 100 Daps Club

    Age:
    30
    Joined:
    Aug 25, 2015
    Messages:
    111
    Daps Received:
    143
    Gender:
    Male
    Location:
    Lusaka
    Dating:
    Single
    The only reason i have stuck to renting is that it is cheaper than getting a mortgage. I am saving up for school so sometimes i have needed to save more money which meant having to move to a cheaper house. Having a mortgage would mean having a fixed monthly payment going up 10 years or more.

    But i think as my income increases i will look into owning my own home. Even if i decide to move from the area i will probably put the house on rent and the rental income should be able to pay off the mortgage if i still have one. And i doubt repair costs will be more than the income that will be received from the house.
     
  10. Winston Smith

    Best Site Comments The 1000 Daps Club Supporter

    Joined:
    May 6, 2016
    Messages:
    2,006
    Daps Received:
    5,422
    Gender:
    Male
    Location:
    Nowhere in Particular
    Orientation:
    Gay
    Dating:
    Not looking
    Well, day late, dollar short, just saw this thread. All good comments. People obviously look at the financial calculations but there are the legal ones which interconnect as well. For example, buying in bigger cities makes you a target for politicians and municipal budget and debt woes. While politicians always figure out ways to crumbsnatch from pockets (such as the Spotify/Netflix tax in Chicago) their main target is always property owners through real estate taxes. This is because it's obviously easy to suck blood from someone tethered to real estate that someone who can pull up by ending a lease or subletting to leave. Chicago, where I live, is on the brink of becoming the next Detroit and I like the idea that I can tell Rahm Emmanuel and Aldermen to go fuck themselves by leaving the county or even crossing state lines to Indiana or Wisconsin while still having access to Chicago employment (I'm sure it's the same for those working in Mid-Atlantic).

    The idea of owning the home after the mortgage is paid is good if the numbers are there when your mortgage is paid. If the surrounding area has gone down in value or municipal services are strained, your initial investment might be not have been worth the 15 or 30 year wait. One my best friends watched a ton of houses go up in his hood prior to the 2008 collapse about the time I was in Iraq (2005). Fast forward to 2009/ 2010, a lot of those newer homes were empty due to foreclosure, HELOC defaults etc. So, through no fault of his or his spouse, their home went down in value as the whole new-build collapse depressed home values in his neighborhood.

    I also, like the advantage of being able to get out of dodge more easily with a lease than a mortgage. If a new job offer comes up you can more easily get out of a lease or sublet for the remainder of the lease than if you have to unload a house by sale, short sale or (God forbid) walking away or a deed-in-lieu. Condos are out of the question for me, as well as homes under strong HOA associations/agreements, as I don't like the idea of having to kiss the asses of other people to effect change on my own property.
     
    LeMignon dapped this.
Loading...
Similar Threads - Renting Throwing Money Forum Date
Was this child a victim or racism or bad parenting? Group Discussions Nov 2, 2016

Share This Page

Loading...