Right, but both buyers and renters pay no income tax. So renters don't have to pay either.
The point I was trying to make is this: the whole (financial) reason to buy a home is that as you build up equity, you will eventually get more money out of the house than you put into it. But when you factor in property taxes and other expenses renters don't have to pay, you won't break even for at least 15 years or so.
Renters don't have to pay buying & selling costs associated with the purchase of the home, property taxes, interest to the lender, or maintenance on the property. So if a renter takes all that money he DOESN'T have to pay compared to a comparable buyer, and he invests it in stocks/bonds, he will come out way ahead of a guy who buys a house and sells it after five years (even when you consider house appreciation). The buyer would have to stay in his home at least 15+ years to just break even with the renter, and the renter has the option to move whenever he wants.
Well you also have to account for inflation (and with the money printing expect it to go up). So your rent will continue to rise of 15 years but your mortgage will stay the same. I'm not saying in your model you don't still net more money. Also mortgage interest is tax deductible. And there's something to be said about quality of life of living in a home vs an apt (unless you're renting a house).
Yeah, that Rent or Buy calculator I linked to above accounts for housing appreciation and rent inflation, and it still came out in the 15 year range.
But I've thought about this some more, and I think there are two ways a buyer can break even earlier. If a buyer gets a foreclosed or a shorted house at a huge discount, and home prices bounce back, they'll earn equity much faster than someone who buys a house at market value.
The other way is if they make massive prepayments on their mortgage. But this option wouldn't work for everyone (i.e. me), because it would require buying a home way beneath one's means. I really like living downtown, where housing is more expensive, and there's no way I could make prepayments on a $300K+ mortgage.
ARM, but fixed for the first 5 years, can only go up by 2%, and I am allowed to refinance if it does. I put down nearly 20K and got the house for 65K (5K less than asking price).
I fully realize it doesn't work that way in all markets (CA, I'm looking at you), but there are 100% for sure markets where buying is MUCH better than renting.
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The point I was trying to make is this: the whole (financial) reason to buy a home is that as you build up equity, you will eventually get more money out of the house than you put into it. But when you factor in property taxes and other expenses renters don't have to pay, you won't break even for at least 15 years or so.
Renters don't have to pay buying & selling costs associated with the purchase of the home, property taxes, interest to the lender, or maintenance on the property. So if a renter takes all that money he DOESN'T have to pay compared to a comparable buyer, and he invests it in stocks/bonds, he will come out way ahead of a guy who buys a house and sells it after five years (even when you consider house appreciation). The buyer would have to stay in his home at least 15+ years to just break even with the renter, and the renter has the option to move whenever he wants.
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But I've thought about this some more, and I think there are two ways a buyer can break even earlier. If a buyer gets a foreclosed or a shorted house at a huge discount, and home prices bounce back, they'll earn equity much faster than someone who buys a house at market value.
The other way is if they make massive prepayments on their mortgage. But this option wouldn't work for everyone (i.e. me), because it would require buying a home way beneath one's means. I really like living downtown, where housing is more expensive, and there's no way I could make prepayments on a $300K+ mortgage.
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So why'd you quit FaceBook?
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Monthly mortgage on my 1000 sq ft 2 bedroom in an area where I feel fine walking after dark: $300.
Hmmmmm yeah.
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(If you don't want to put that information here, you can PM me on facebook).
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I fully realize it doesn't work that way in all markets (CA, I'm looking at you), but there are 100% for sure markets where buying is MUCH better than renting.
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