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I'm not sure I understand this question? If you're asking why I don't own a house, its because I'm not quite ready to make that commitment at this point in my

I'm not sure I understand this question? If you're asking why I don't own a house, its because I'm not quite ready to make that commitment at this point in my life. :) I'm happy with the flexibility of paying rent, and I pay a REALLY low amount of rent (by San Francisco standards) in a nice place. I'm content.

prawn 13y ago
Obviously much depends on your exact financial position and the state of the real estate market, but you don't have to live where you buy forever. It can be advantageous to get into the market and rent out your property if you get bored, leveraging your tenants rental payments.
- kintamanimatt 13y ago
  It can be extraordinarily disadvantageous too. Property prices are still extremely high and it's not clear whether this is sustainable over the long-run. Buying or selling a house (at least where I have experience) is a slow, expensive, and fragile process; there are significant costs for both parties. Renting out a property isn't fun either. Finding suitable tenants and dealing with repairs and other silliness, or paying a property management company that's often despised by tenants, isn't necessarily trivial. Rents might not cover mortgage payments in certain economic periods, especially when factoring in additional expenses. The time that's spent dealing with this headache could be better used doing something else. Lastly, certain types of mortgages might prohibit renting, and I've seen people caught with their pants down over this. Owning a place is a burden. It can make financial sense to do so in some situations but I'd be reluctant to buy unless I truly felt I was going to remain in one location for a long (>10 years) period of time. I certainly wouldn't feel like I could just rent it out if I wanted to hop, skip, and jump to a new location after a year or two, or less. Of course, all my experience is based on buying and renting in the UK. It might be different wherever you are.
  - prawn 13y ago
    It is different in Australia though it's not an especially liquid asset anywhere. Market has flattened, but it's still strong. Prices tend to double every ten years but moved more quickly recently. Haven't heard of anyone not able to rent their property out. Most people who can afford to will buy property. There is no expectation that rent will cover a mortgage - you pay the shortfall and it's still a deal worth considering.
    - kintamanimatt 13y ago
      The difference between the UK and Australia is Australia has tight controls on foreign property ownership, and it can be quite a hassle to buy if you're not a long-term visa holder or citizen. Long-term visa holders also have to sell the property at the end of their stay.[0] Australia also has a decent number of moderate-stay (<=12 months) temporary residents (working holiday, etc) that aren't allowed to buy under FIRB guidelines, or don't have the fiscal means, both of which increase demand for rentals. I strongly doubt whether the increasing price of housing is sustainable. If it's increasing beyond that of inflation, it's a bubble and people simply just aren't going to be able to afford it. People on the upswing of any market become complacent that prices will always continue to rise, but this isn't necessarily true. The future is yet to be determined, and who knows what will happen. I have known landlords who have had their properties vacant for several months at a time. Their mortgages continued though and this put a lot of pressure on them financially. There's also the issue of tenants that end up not paying, or paying late, etc. You're not wrong and your strategy has a strong superficial appeal: property ownership with flexibility! Properties can be rented out, it's possible to find great long-term tenants, and it's even possible to break even or make a slight profit as an amateur landlord. Your strategy can be made to work, it's just the costs probably aren't worth it unless you're a landlord with a good number of properties. I'd argue the actual flexibility is marginal compared to renting; if I want to leave my rented property, I can do so quite easily and with minimal moving costs. I do appreciate the cost of this flexibility too though: I'm paying someone else's mortgage with nothing to show for it in the long term. Also, owning has the distinct advantage of control: nobody's going to be a more accommodating landlord to me than me! [0] This assumes that the property is a second-hand dwelling, not one bought from a new developer, or been renovated, or any of the other exceptions that come to mind.
chii 13y ago
bit odd you hasn't paid rent but instead paid a mortgage, would you have been better off financially?
- protomyth 13y ago
  Quite a lot of people aren't better off. In fact, a lot of them have underwater mortgages because they listened to the "house is an investment" crowd. Buying a house and losing your job / income source, can cause some pretty long term unemployment since it is hard to move with an anchor around you. As a country, we would have been a lot better off if a lot more people had been renters.
  - derleth 13y ago
    > the "house is an investment" crowd They are. What people neglect to mention is that some investments, houses included, fail to pan out, and leave you worse off than you were before. Simply assuming that a mortgage builds useful equity is financially illiterate: If houses were a sure thing, everyone and every institution would buy them. The really insidious idea is the idea that buying a house is what a mature, responsible person does, and that you can't be a mature, responsible person unless you're paying down a mortgage. This is marginally less potentially harmful to your future happiness than the idea that mature, responsible people smoke five packs of cigarettes a day.
    - wazoox 13y ago
      To make your argument clearer: if you buy a house and don't bring a significant amount of your own money to the deal (let's say 20 to 30% of the whole), as during the first years of the mortgage you're mostly paying interest and almost no capital, you're actually throwing your money down the drain in exactly the same way as you'd do paying a rent, BUT with the added responsibilities coming with the mortgage on one hand, and owning the house on the other hand.
      - protomyth 13y ago
        Nicely stated (wish I had done a better job of it). That's basically the trap. Some people can do that and a house makes sense. People like to own. A lot of people bought a house and fell into the trap you describe. A lot of those people didn't have good job mobility in the local area[1]. 1) I would love to see a study from about 2000 to now on all the folks that defaulted and what their down payment was combined with the job outlook for their profession.

prawn 13y ago

Obviously much depends on your exact financial position and the state of the real estate market, but you don't have to live where you buy forever. It can be advantageous to get into the market and rent out your property if you get bored, leveraging your tenants rental payments.

kintamanimatt 13y ago
It can be extraordinarily disadvantageous too. Property prices are still extremely high and it's not clear whether this is sustainable over the long-run. Buying or selling a house (at least where I have experience) is a slow, expensive, and fragile process; there are significant costs for both parties. Renting out a property isn't fun either. Finding suitable tenants and dealing with repairs and other silliness, or paying a property management company that's often despised by tenants, isn't necessarily trivial. Rents might not cover mortgage payments in certain economic periods, especially when factoring in additional expenses. The time that's spent dealing with this headache could be better used doing something else. Lastly, certain types of mortgages might prohibit renting, and I've seen people caught with their pants down over this. Owning a place is a burden. It can make financial sense to do so in some situations but I'd be reluctant to buy unless I truly felt I was going to remain in one location for a long (>10 years) period of time. I certainly wouldn't feel like I could just rent it out if I wanted to hop, skip, and jump to a new location after a year or two, or less. Of course, all my experience is based on buying and renting in the UK. It might be different wherever you are.
- prawn 13y ago
  It is different in Australia though it's not an especially liquid asset anywhere. Market has flattened, but it's still strong. Prices tend to double every ten years but moved more quickly recently. Haven't heard of anyone not able to rent their property out. Most people who can afford to will buy property. There is no expectation that rent will cover a mortgage - you pay the shortfall and it's still a deal worth considering.
  - kintamanimatt 13y ago
    The difference between the UK and Australia is Australia has tight controls on foreign property ownership, and it can be quite a hassle to buy if you're not a long-term visa holder or citizen. Long-term visa holders also have to sell the property at the end of their stay.[0] Australia also has a decent number of moderate-stay (<=12 months) temporary residents (working holiday, etc) that aren't allowed to buy under FIRB guidelines, or don't have the fiscal means, both of which increase demand for rentals. I strongly doubt whether the increasing price of housing is sustainable. If it's increasing beyond that of inflation, it's a bubble and people simply just aren't going to be able to afford it. People on the upswing of any market become complacent that prices will always continue to rise, but this isn't necessarily true. The future is yet to be determined, and who knows what will happen. I have known landlords who have had their properties vacant for several months at a time. Their mortgages continued though and this put a lot of pressure on them financially. There's also the issue of tenants that end up not paying, or paying late, etc. You're not wrong and your strategy has a strong superficial appeal: property ownership with flexibility! Properties can be rented out, it's possible to find great long-term tenants, and it's even possible to break even or make a slight profit as an amateur landlord. Your strategy can be made to work, it's just the costs probably aren't worth it unless you're a landlord with a good number of properties. I'd argue the actual flexibility is marginal compared to renting; if I want to leave my rented property, I can do so quite easily and with minimal moving costs. I do appreciate the cost of this flexibility too though: I'm paying someone else's mortgage with nothing to show for it in the long term. Also, owning has the distinct advantage of control: nobody's going to be a more accommodating landlord to me than me! [0] This assumes that the property is a second-hand dwelling, not one bought from a new developer, or been renovated, or any of the other exceptions that come to mind.

chii 13y ago

bit odd you hasn't paid rent but instead paid a mortgage, would you have been better off financially?

protomyth 13y ago
Quite a lot of people aren't better off. In fact, a lot of them have underwater mortgages because they listened to the "house is an investment" crowd. Buying a house and losing your job / income source, can cause some pretty long term unemployment since it is hard to move with an anchor around you. As a country, we would have been a lot better off if a lot more people had been renters.
- derleth 13y ago
  > the "house is an investment" crowd They are. What people neglect to mention is that some investments, houses included, fail to pan out, and leave you worse off than you were before. Simply assuming that a mortgage builds useful equity is financially illiterate: If houses were a sure thing, everyone and every institution would buy them. The really insidious idea is the idea that buying a house is what a mature, responsible person does, and that you can't be a mature, responsible person unless you're paying down a mortgage. This is marginally less potentially harmful to your future happiness than the idea that mature, responsible people smoke five packs of cigarettes a day.
  - wazoox 13y ago
    To make your argument clearer: if you buy a house and don't bring a significant amount of your own money to the deal (let's say 20 to 30% of the whole), as during the first years of the mortgage you're mostly paying interest and almost no capital, you're actually throwing your money down the drain in exactly the same way as you'd do paying a rent, BUT with the added responsibilities coming with the mortgage on one hand, and owning the house on the other hand.
    - protomyth 13y ago
      Nicely stated (wish I had done a better job of it). That's basically the trap. Some people can do that and a house makes sense. People like to own. A lot of people bought a house and fell into the trap you describe. A lot of those people didn't have good job mobility in the local area[1]. 1) I would love to see a study from about 2000 to now on all the folks that defaulted and what their down payment was combined with the job outlook for their profession.