4 ms·

You are not building equity when renting. If you plan to be in a location for more than a year, it's worth buying a home. Mortgage payments (minus interest) are

You are not building equity when renting. If you plan to be in a location for more than a year, it's worth buying a home. Mortgage payments (minus interest) are then just going back into your own pocket vs. rent which is going into your landlord's pocket. Even if you never want to do your own maintenance, you can pay a handyman and still be far ahead in cash.

dredmorbius 13y ago
You are not building equity when renting. If the net cost of renting is lower than the net cost of renting money to own a mortgage, then you've still got the option of investing in other assets which may appreciate over time. Say, a business. Which represents real net economic growth, not merely asset inflation. If you plan to be in a location for more than a year, it's worth buying a home. Stating that as a blanket recommendation is so false it's not even wrong. A buy-vs-rent decision depends on a great many factors, including transaction costs (high for real estate sales), moving costs, appreciation risks, etc. There are many areas where even a 10-15 year tenancy may favor renting over buying. Mortgage payments (minus interest) are then just going back into your own pocket. Not if your property's under water. Haven't we learned anything?
- chii 13y ago
  wait, is under water here to mean literally under water - as in sinking into the ocean?! Or is that jargon for something?
  - anoncowherd 13y ago
    It's a figure of speech. The idea is that your apartment's current market value is lower than your outstanding debt (or perhaps the total price you paid for the apartment).
markkanof 13y ago
This is extremely optimistic. It's usually more like if you are going to stay in a place for 3-5 years then maybe it's worth buying. The first few years you are paying almost all interest and not much principle. In addition you need to factor in transaction costs (realtor fees, lending fees, etc.). Plus it can often take close to a year to go through the full cycle of buying and then selling a home. Using your one year rule just isn't realistic.
brianobush 13y ago
I would say more than three years to recoup costs of buying.
Terretta 13y ago
> If you plan to be in a location for more than a year, it's worth buying a home. Even in the big inflation years I recall the over under on this as closer to seven years. Depends on your circumstances of course. So run the numbers: http://www.nytimes.com/interactive/business/buy-rent-calculator.html http://www.nytimes.com/interactive/business/buy-rent-calcula...
pc86 13y ago
> If you plan to be in a location for more than a year To paraphrase another response, this is so wrong it physically hurts. This type of nonsense is exactly what causes people in their early 20's to buy a $350,000 house and end up foreclosed on 18 months later. Running any rent v. buy calculator for my area shortly before buying my home (at the end of 2010) told me that I needed to be in the area (e.g. within a 30-minute commute by car) for 7 years to break even on the purchase of a home. After that the benefits of buying quickly took over the benefits of renting, but for those first 7 years it is technically a financial loss. This is just flat-out dangerous and wrong "advice."

dredmorbius 13y ago

You are not building equity when renting. If the net cost of renting is lower than the net cost of renting money to own a mortgage, then you've still got the option of investing in other assets which may appreciate over time. Say, a business. Which represents real net economic growth, not merely asset inflation. If you plan to be in a location for more than a year, it's worth buying a home. Stating that as a blanket recommendation is so false it's not even wrong. A buy-vs-rent decision depends on a great many factors, including transaction costs (high for real estate sales), moving costs, appreciation risks, etc. There are many areas where even a 10-15 year tenancy may favor renting over buying. Mortgage payments (minus interest) are then just going back into your own pocket. Not if your property's under water. Haven't we learned anything?

chii 13y ago
wait, is under water here to mean literally under water - as in sinking into the ocean?! Or is that jargon for something?
- anoncowherd 13y ago
  It's a figure of speech. The idea is that your apartment's current market value is lower than your outstanding debt (or perhaps the total price you paid for the apartment).

markkanof 13y ago

This is extremely optimistic. It's usually more like if you are going to stay in a place for 3-5 years then maybe it's worth buying. The first few years you are paying almost all interest and not much principle. In addition you need to factor in transaction costs (realtor fees, lending fees, etc.). Plus it can often take close to a year to go through the full cycle of buying and then selling a home. Using your one year rule just isn't realistic.

brianobush 13y ago

I would say more than three years to recoup costs of buying.

Terretta 13y ago

> If you plan to be in a location for more than a year, it's worth buying a home. Even in the big inflation years I recall the over under on this as closer to seven years. Depends on your circumstances of course. So run the numbers: http://www.nytimes.com/interactive/business/buy-rent-calculator.html http://www.nytimes.com/interactive/business/buy-rent-calcula...

pc86 13y ago

> If you plan to be in a location for more than a year To paraphrase another response, this is so wrong it physically hurts. This type of nonsense is exactly what causes people in their early 20's to buy a $350,000 house and end up foreclosed on 18 months later. Running any rent v. buy calculator for my area shortly before buying my home (at the end of 2010) told me that I needed to be in the area (e.g. within a 30-minute commute by car) for 7 years to break even on the purchase of a home. After that the benefits of buying quickly took over the benefits of renting, but for those first 7 years it is technically a financial loss. This is just flat-out dangerous and wrong "advice."