4 ms·

> pay $2000 per month * 12 and get 0 equity, vs paying $2000 * 12 + 2000 and get some percentage of that in equity In many/most markets, renting a place costs

by runako 15y ago

> pay $2000 per month * 12 and get 0 equity, vs paying $2000 * 12 + 2000 and get some percentage of that in equity In many/most markets, renting a place costs less per month than owning it. Spending an equivalent amount on rent vs. total home ownership overhead typically will mean that the renter ends up in a much nicer place. So the math would typically look something like this: > pay $1200 per month * 12 and get $11,600 in investable cash, vs paying $2000 * 12 + 2000 and get some percentage of that in equity risk. FWIW, I've owned homes in two states and taxes have increased every year without fail, even when housing crashed.

lpolovets 15y ago
The buy:rent ratio varies a lot from place to place. In a few markets, like New York, buying is definitely way more expensive than renting. On the opposite end of the spectrum, in a place like Vegas or Miami, your rent will be significantly more than your mortgage payment. I think a buy-to-rent ratio of about 15 (i.e. 15 years rent = purchase price) is about where buying and renting break even. If you live in a place with a lower ratio, your mortgage payment would be less than the rent on the equivalent place; if you live in a place with a higher ratio, you can get a nicer place for the same monthly amount by renting. http://explore.trulia.com/datavis/rentvsbuy/Q2-2011/ http://explore.trulia.com/datavis/rentvsbuy/Q2-2011/
- Vadoff 15y ago
  "On the opposite end of the spectrum, in a place like Vegas or Miami, your rent will be significantly less than your mortgage payment." I think you meant to say significantly more.
  - lpolovets 15y ago
    Fixed. Thanks!
- runako 15y ago
  Generally agree with your comment, but a couple of small quibbles with the numbers. The ratios and stats typically published by those in the RE industry (the Trulia post included) only take into account the mortgage payment itself. That is, principal and interest. Those are not generally even close to the monthly payment that a homeowner sends to the bank, which must cover insurance, taxes, etc. The difference is frequently substantial. And of course, a homeowner still has the obligation of maintenance.
ebiester 15y ago
As a counterpoint, my parents pay less on their nice 4 bedroom house in a desirable neighborhood than I paid for a 2 bedroom house in the same city. If you're planning on staying in the valley for 20 years, you will never find a better deal on rent in 20 years then if you buy today. I rent because I like the option to chase opportunity.

by runako 15y ago

lpolovets 15y ago

The buy:rent ratio varies a lot from place to place. In a few markets, like New York, buying is definitely way more expensive than renting. On the opposite end of the spectrum, in a place like Vegas or Miami, your rent will be significantly more than your mortgage payment. I think a buy-to-rent ratio of about 15 (i.e. 15 years rent = purchase price) is about where buying and renting break even. If you live in a place with a lower ratio, your mortgage payment would be less than the rent on the equivalent place; if you live in a place with a higher ratio, you can get a nicer place for the same monthly amount by renting. http://explore.trulia.com/datavis/rentvsbuy/Q2-2011/ http://explore.trulia.com/datavis/rentvsbuy/Q2-2011/

Vadoff 15y ago
"On the opposite end of the spectrum, in a place like Vegas or Miami, your rent will be significantly less than your mortgage payment." I think you meant to say significantly more.
- lpolovets 15y ago
  Fixed. Thanks!
runako 15y ago
Generally agree with your comment, but a couple of small quibbles with the numbers. The ratios and stats typically published by those in the RE industry (the Trulia post included) only take into account the mortgage payment itself. That is, principal and interest. Those are not generally even close to the monthly payment that a homeowner sends to the bank, which must cover insurance, taxes, etc. The difference is frequently substantial. And of course, a homeowner still has the obligation of maintenance.

ebiester 15y ago

As a counterpoint, my parents pay less on their nice 4 bedroom house in a desirable neighborhood than I paid for a 2 bedroom house in the same city. If you're planning on staying in the valley for 20 years, you will never find a better deal on rent in 20 years then if you buy today. I rent because I like the option to chase opportunity.