Rent they said. It’s cheaper they said.

[Sad Bunny]

You would be surprised breh.

A lot of people are not aware of the total costs of home ownership. Have you ever heard of the expression "house poor"? This is a common phenomenon. A lot of people just budget the promised monthly payment. But shyt happens beyond that, that a lot of people can't deal with.

And a lot of people buy houses they don't need. It's easy to see what you are pre-approved for and find a house that pushes up against that number. But if a boiler craps out or you need a new roof you either have to put it on the CC or take out a HELOC.

Let's stop with the cap. Home ownership can be great. It sometimes is not.

Nah. House poor is when your mortgage payment is literally more than you can afford. Plenty of people get warranties in their home etc.

My friend owned his home since 2014 and he’s had one issue with the AC that costed like $300 tops.

I’ve had zero issues thus far.

 

[Sad Bunny]

How would you know?
Muafukka you're a forever renter and proud
You going back and forth with everyone about the downside of homeownership and all these fees yet you've never gone through it.
You look foolish

Roofs last like 20-25 years. nikka talking about old ass houses.

These new energy efficient ass homes and warranties keep us covered. My utilities are the same ass my apartment except I pay water and trash now.

 

[keond]

Roofs last like 20-25 years. nikka talking about old ass houses.

These new energy efficient ass homes and warranties keep us covered. My utilities are the same ass my apartment except I pay water and trash now.

My roof was 8k and it has a 25 year warranty. My house came with a new AC, new appliances. Haven’t had to fix shyt since I moved in. Taxes are built into my escrow and mortgage payments. Dude is just a doom and gloom poster.

 

[Sad Bunny]

My roof was 8k and it has a 25 year warranty. My house came with a new AC, new appliances. Haven’t had to fix shyt since I moved in. Taxes are built into my escrow and mortgage payments. Dude is just a doom and gloom poster.

Right. Do they not realize that escrow is a thing? Lol.

 

[Ozymandeas]

I dont even know why people arguing in here. How does anyone in here benefit from persuading a hard headed mofo to buy a house instead of renting?

If they dont want to own real estate, that's on them. I could care less about convincing anyone.

We gonna convince them to max out their 401k next? Let the blind stay blind.

 

[Maxine Shaw]

A lot of people are not aware of the total costs of home ownership. Have you ever heard of the expression "house poor"? This is a common phenomenon. A lot of people just budget the promised monthly payment. But shyt happens beyond that, that a lot of people can't deal with.

Bought a house last August, and...yeah. Welcome to my life. shyt, I damn near had to do porn just to buy paint and pay for the floors those first few months.

 

[HabitualChiller]

It's not that it is generally smarter, but folks only look at the sticker price: Rent vs Mortgage. My rent pretty much begins and ends my costs. Mortgage, prop taxes, fees for buying, regular upkeep, having to buy or service your own appliances, etc.

People talk about Rent vs Mortgage like it's the difference between buying 100% reinforced leather boots that will appreciate vs renting multiple lower quality boots over time and you won't wear either one. Ownership also means maintenance. Oh you get a pest problem? Thats out your pocket. Sump pump? Thats on you. shyt, mold in a corner of the top floor bathroom? Damn, they gotta damn near gut it to get to the root of it which turns out to be a roof leak.

No, these things don't happen all the time but anyone who actually owns a house knows that affording the mortgage does not mean affording the home. I only need to lose my income to lose my apartment. Home? Let Property taxes go up and suddenly my budget busts. Let the city finish that long-delayed restoration and now have more demand in the area...my assessments are up. Damn, there is an opportunity to move so I can pursue this job...can't just break a lease, gotta actually move an asset with all that comes with it. More often than not owning is the smart play BUT it is unquestionably more costly in total but people let the prospect of equity talk them into things they actually can't afford if just a couple of things go sideways on them. Not to mention you have to live somewhere so while all that house value talk is sweet, guess what, you sell your house for 100k more than you bought it for but all the other homes went up 100k or more in the meantime...include the maintenance and most people are never really getting over with that same equity they rah rah for.

Helluva post.

 

[JT-Money]

Some people won't buy a home due to moving around a ton. I know several people in the military who are forced to relocate like every 2 years.

I also wouldn't want to be trapped in one particular area either unless I was 100% sure I was staying put. Housing values will eventually come back down to earth along with interest rates.

The key is making sure your salary keeps pace with inflation. And you don't use your job during the upcoming recession. Because if it gets as bad as they say foreclosures will soon skyrocket.

 

[1thouwow]

My tenants check just cleared. Thank you renters

 

[Sir Richard Spirit]

I could try to get a mortgage for $1,000,000 to live in downtown Chicago.

I could get this for $500,000. Living 25 minutes away.

88 Avon Rd, Northbrook, IL 60062 | realtor.com®

View 25 photos of this 3 bed, 3 bath, 2464 sqft. townhome located at 88 Avon Rd, Northbrook, IL 60062 on sale now for $499000.

www.realtor.com

I could get this for $300,000. Living 30 minutes away.

1139 Douglas Ave, Flossmoor, IL 60422 | realtor.com®

View 33 photos of this 3 bed, 3 bath, 2100 sqft. single family home located at 1139 Douglas Ave, Flossmoor, IL 60422 on sale now for $309000.

www.realtor.com

 

[At30wecashout]

I could try to get a mortgage for $1,000,000 to live in downtown Chicago.

I could get this for $500,000. Living 25 minutes away.

88 Avon Rd, Northbrook, IL 60062 | realtor.com®

View 25 photos of this 3 bed, 3 bath, 2464 sqft. townhome located at 88 Avon Rd, Northbrook, IL 60062 on sale now for $499000.

www.realtor.com

I could get this for $300,000. Living 30 minutes away.

1139 Douglas Ave, Flossmoor, IL 60422 | realtor.com®

View 33 photos of this 3 bed, 3 bath, 2100 sqft. single family home located at 1139 Douglas Ave, Flossmoor, IL 60422 on sale now for $309000.

www.realtor.com

Or hit Skokie which is closer to Downtown than either of those and houses are in the 300k range. Northbrook however is gorgeous if you are willing to live that suburban life.

 

[Conan]

I could try to get a mortgage for $1,000,000 to live in downtown Chicago.

I could get this for $500,000. Living 25 minutes away.

88 Avon Rd, Northbrook, IL 60062 | realtor.com®

View 25 photos of this 3 bed, 3 bath, 2464 sqft. townhome located at 88 Avon Rd, Northbrook, IL 60062 on sale now for $499000.

www.realtor.com

I could get this for $300,000. Living 30 minutes away.

1139 Douglas Ave, Flossmoor, IL 60422 | realtor.com®

View 33 photos of this 3 bed, 3 bath, 2100 sqft. single family home located at 1139 Douglas Ave, Flossmoor, IL 60422 on sale now for $309000.

www.realtor.com

Thanks for posting this. I'm going to use these 2 houses you've posted.

Here is what we are going with. We assume both individuals have the same resources. And we assume both individuals are "throwing money away".

Buyer throws away the closing costs, mortgage interest, property taxes, home maintenance/repairs, home insurance, PMI insurance (if any) every month. He/she will never see those costs again. The buyer is primarily dependent on appreciation of his house for profit. If his total monthly expenses are less than what an equivalent renter would pay in a certain month, he invests the delta in the market.

Renter throws away the rent, rental insurance, and interest he/she could have accrued from the security deposit if it was in the stock market. He/she will never see those costs again. The renter is primarily dependent on investing a would be down payment for profit. If his total monthly expenses are less than what an equivalent home owner would pay in a certain month, he invests the delta in the market.

We will see where the buyer/renter ends up after 30 years, for both houses. Leggo....

 

[Conan]

Scenario A: Flossmoor IL.

TL,DR:

The buyer is up by $619K (home appreciation) + $980K (money saved from buying that is invested) = $1.6M
The renter is up by $931K (invested his down payment in the market)

The buyer wins, by $669K over 30 years.

Details:

3 bed 2.5 bath house, listed for $300K. I'm going to throw this in my rent vs buy spreadsheet as a demonstration of how it can be better to rent or buy depending on the situation.

Ok, so here are the assumptions on the buy side:

Mortgage term: 30 years
Down payment: 20% (no PMI required)
Closing costs: 4% (buy), 6% (sell)
Maintenance costs: 0.5% per annum
Property tax on this property: 2.46% per annum
Home insurance: 0.04% per month

Over the last 30 years, homes nationally have appreciated at an average of 3.8% per annum. So I'm using that for home appreciation. House prices have shot up in the last 2-3 years but it would be foolish to expect that to last.

Alright, so after a 30 year mortgage, the home has appreciated by $618K. Remove selling costs, adjusting for mortgage interest tax deduction, and you're up by $619K.

Let's move over to the rent side.

Ok, so I attempted to find rent information in Flossmoor for an equivalent sized house/apartment. On Realtor.com, I found a 4 Bed 2 Bath house in Park Forest, IL (11 minutes away) renting for $1950 per month.

Assumptions on the rent side:

Annual rent appreciation: 4.50%
Renters insurance: $180 per year
Annual stock market rise: 9.8%

Now, remember that on the buy side, a security deposit of 60,000 was placed down. Instead, we invest that in the stock market. After 30 years it has appreciated to $991K, for a net profit of $931K.

Now, what we have to do is see what the delta in monthly expenses is between the renter and buyer, and then see who comes off better.

In this instance, the buyer comes out ahead over 30 years by $980K. Despite the renter having an early advantage, after 3 years, the rent grows to the point that the buyer is throwing less money away than the renter.

So in summary:

The buyer is up by $619K + $980K = $1.6M
The renter is up by $931K.

The buyer wins, by $669K over 30 years.

 

[Killah Ray]

Man I don’t even know what I’d do if I had to buy a house in this market. I was stressed the fukk out 7 years ago going through the process and felt like saying fukk it at least 20 times.

Also this being the Coli, a lot of the people in here arguing the hardest about home ownership are either renting or living with their parents…

nikkas stay thirsting for that e-clout…

 

[Conan]

Scenario B: Northbrook IL.

TL,DR:

The buyer is up by $1.03M (home appreciation)
The renter is up by $1.55M (invested his down payment in the market) + $1.12M (money saved from buying that is invested) = $2.67M

The renter wins, by $1.64M over 30 years.

Details:

3 bed 2.5 bath house, listed for $500K.

Same assumptions as above.

Alright, so after a 30 year mortgage, the home has appreciated by $1.03M. Remove selling costs, adjusting for mortgage interest tax deduction, and you're still up by $1.03M.

Let's move over to the rent side.

I attempted to find rent information in Northbrook for an equivalent sized house/apartment. On Realtor.com, I found a 3 bed 2 bath ranch in Northbrook, IL (0 minutes away) renting for $2400 per month.

Assumptions on the rent side remain the same.

Now, remember that on the buy side, a security deposit of 100,000 was placed down. Instead, we invest that in the stock market. After 30 years it has appreciated to $1.65M, for a net profit of $1.55M.

Now, what we have to do is see what the delta in monthly expenses is between the renter and buyer, and then see who comes off better.

The renter pays less than the buyer in unrecoverable costs until year 12. After year 12 rent outpaces the unrecoverable costs being spent by the buyer. But the renter has the advantage of compound interest on his side, because he was able to invest his delta earlier. Overall, the renter comes out ahead in savings of unrecoverable costs, invested, to the tune of $1.12M.

So in summary:

The buyer is up by $1.03M
The renter is up by $1.55M + $1.12M = $2.67M.

The renter wins, by $1,64M over 30 years.