True cost of housing.

I'm reading the highlights of a new real estate survey and the few things jumped out.
The national cost of renting a two bedroom apartment is just under $2000 a month. Obviously, a few places are much higher. Las Vegas comes in at $1797.
The average home owner spends $24000 a year between taxes, insurance, and upkeep, according to trade magazine Real Estate Witch.. Those figures do not include a mortgage, and have risen sharply over the last ten years.
Assuming these.figures are accurate, the cost of buying vs renting is narrower than ever.

In Las Vegas, a typical two bedroom condo will run you between 250k and 400k, unless you go real cheap or ultra high end. A 300,000 condo will set you back $60,000 for a down payment and about $1200 a month in mortgage plus the long term $25,000 a year in upkeep ,taxes and Insurance.
Renting will run about $1800 a month, plus the price of renters Insurance.
Renters insurance is much cheaper than homeowners, as you only insure the contents, not the premise and the dirt.
By renting you forfeit any future increase in your homes value, and will be subject to future price increases, but the maths show.the gap between the two is.nowhere near what people think.

Quote: billryan

I'm reading the highlights of a new real estate survey and the few things jumped out.
The national cost of renting a two bedroom apartment is just under $2000 a month. Obviously, a few places are much higher. Las Vegas comes in at $1797.
The average home owner spends $24000 a year between taxes, insurance, and upkeep, according to trade magazine Real Estate Witch.. Those figures do not include a mortgage, and have risen sharply over the last ten years.
Assuming these.figures are accurate, the cost of buying vs renting is narrower than ever.

In Las Vegas, a typical two bedroom condo will run you between 250k and 400k, unless you go real cheap or ultra high end. A 300,000 condo will set you back $60,000 for a down payment and about $1200 a month in mortgage plus the long term $25,000 a year in upkeep ,taxes and Insurance.
Renting will run about $1800 a month, plus the price of renters Insurance.
Renters insurance is much cheaper than homeowners, as you only insure the contents, not the premise and the dirt.
By renting you forfeit any future increase in your homes value, and will be subject to future price increases, but the maths show.the gap between the two is.nowhere near what people think.

That $24K seems awful high to me.

In Florida I thought my property insurance and property taxes were high. I pay about $7000 for insurance and my property tax is $5000.

They take anticipated expenses for a twenty five year period, and divide by 25. It includes a roof, a sidewalk and driveway, a HVAC plus two water heaters, ovens, dryers, interior paintings, garbage pickups, insurance. It doesn't include floors,carpets,landscaping or flood insurance.
It is the long term cost of owning a house. Most years won't cost that, but some years will be pricey. My Mom replaced her roof and water heater one year and needed a garage roof the next. Houses age and need maintenance.
I think most long-term homeowners will also do a.major project- a new bathroom or kitchen over that period.

Quote: billryan

I'm reading the highlights of a new real estate survey and the few things jumped out.
The national cost of renting a two bedroom apartment is just under $2000 a month. Obviously, a few places are much higher. Las Vegas comes in at $1797.
The average home owner spends $24000 a year between taxes, insurance, and upkeep, according to trade magazine Real Estate Witch.. Those figures do not include a mortgage, and have risen sharply over the last ten years.
Assuming these.figures are accurate, the cost of buying vs renting is narrower than ever.

In Las Vegas, a typical two bedroom condo will run you between 250k and 400k, unless you go real cheap or ultra high end. A 300,000 condo will set you back $60,000 for a down payment and about $1200 a month in mortgage plus the long term $25,000 a year in upkeep ,taxes and Insurance.
Renting will run about $1800 a month, plus the price of renters Insurance.
Renters insurance is much cheaper than homeowners, as you only insure the contents, not the premise and the dirt.
By renting you forfeit any future increase in your homes value, and will be subject to future price increases, but the maths show.the gap between the two is.nowhere near what people think.
link to original post

Upkeep is the variable.
Lawn mowing
Lawn fertilizing/weed prevention
Tree maintenance
Flowers
Insect service
Sprinkler service
Spring/fall cleanup
Roof/gutter cleaning/replacement
Hot water tank/air conditioner/appliances/
Painting
Bathroom fixtures/remodeling
Garage door repair/replacement
Security system
Insurance
Real estate taxes.
HOA fees
Gas
Electric
Internet
Water
Cable TV.
Furniture
Annual AC/heater tune up.
Edit…. Snow removal!

I’m sure I’m leaving stuff out. Owning and maintaining a home is expensive. I’m sure many do without some of the stuff I mentioned, or do some of it themselves, or just don’t do it.

Quote: SOOPOO

I’m sure I’m leaving stuff out. Owning and maintaining a home is expensive. I’m sure many do without some of the stuff I mentioned, or do some of it themselves, or just don’t do it.
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Snow removal...

My father in law saves a ton of money on handyman repairs by making his son in law do the stuff he can't handle.

Apartments in many places have pools and health clubs, while most houses don't. Its a tradeoff between owning and renting.
One consideration few want to discuss but couples need to understand the possibilities that one will die and future income will be greatly reduced.

Apartments in many places have pools and health clubs, while most houses don't. Its a tradeoff between owning and renting.
One consideration few want to discuss but couples need to understand the possibilities that one will die and future income will be greatly reduced.

As far as I can remember, home ownership has been considered to be a great. investment.

During the past five years there has been an incredible rise in apartment rents, especially in the past year. In Knoxville, if you want a one bedroom apartment for less than 6 months it is $3,000/mo. Most two bedroom apartments on a one year lease are a minimum of $2,000 month and most are higher, while the purchase of a new home will have very low maintenance for10-15 years. Apartments are small and houses usually offer far more space. Houses offer far more privacy and quiet than apartments.

Real estate corporations have business plans of buying houses and converting them into rental properties, because rents are so high and house maintenance is so low.

I suspect you are quoting numbers from an article or website that exists to encourage people to rent. Your rent numbers sound out of date.

My experience in the Vegas area supports the OP. I did all the math and there was no way to justify purchasing anything rather than renting. And I can do any repair or improvement except a roof. (Despite the tail, I am not good at climbing and will fall.)

Biggest financial reason: missing investment capital. I could put a down payment on a house and pay interest (same as paying rent, but on money instead of property.) Or I could write a check and buy something outright, but that same money left at the brokerage would be collecting enough money-rent to pay property-rent.

The plus side of buying- you may get better neighbors... at least when you moved in. But the flip side of that is if you get some bad neighbors in the future you are kind of screwed- if you want to leave you are going to have to palm those people off on a new buyer, and you might not get away with that and lose money. If you have bad neighbors in an apartment you can up and leave, and they become only the landlord's problem. So there's much more flexibility in renting. I've advised young people to not buy a house until they have a job they are confident they will retire at, because then what happens if they get the offer of a lifetime a thousand miles away? Roll the dice, on whether they will make money or lose when they sell, but being when you move out of a town there are usually plenty of others moving out at the same time for the same reason, basic supply and demand suggests you are more likely to lose money.

Quote: gordonm888

I suspect you are quoting numbers from an article or website that exists to encourage people to rent. Your rent numbers sound out of date.
link to original post

This is true for all advocacy. If someone is trying to make a point about something, and feel excessive costs are involved in what they are criticizing, they find the highest numbers that are out there with the broadest assumptions

Having said that, those of us that are homeowners are naturally taking the opposite position and will tend to estimate low, even to the point of sticking the head into the sand

A renter knows exactly what his housing costs are for the length of their lease. A homeowner doesn't know when
his.roof, water heater or windows will need replacing.The article is geared towards retirees looking to downsize and or relocate.
The point being that the old formulas may no longer work as well as they once did.

Buying a house and renting it out can be a good investment. Buying a house and living in it is not the same thing.

Quote: billryan

Buying a house and renting it out can be a good investment. Buying a house and living in it is not the same thing.
link to original post

Either way, you are building equity. In most cases building equity on the total value of the property with an initial investment of only a fraction of the total value.

Quote: billryan

A renter knows exactly what his housing costs are for the length of their lease.

And the landlord knows exactly how much to increase his rent when the lease expires. Rents are increasing faster than home values.

'According to Federal Reserve and National Association of Realtors data, the typical U.S. homeowner has a net worth of roughly $430,000, while the average renter has a net worth of about $10,000. This means homeowners are roughly 40 to 43 times wealthier than renters'

if either buying or renting was better, then every rational person would choose the one that was better. Then there would be no demand for the other one and that would be better.

I/m on the side that renting is usually better for the money. But that's true for most things, not buying stuff will leave us with more money. Sometimes there/s just stuff a person wants to buy and they should buy it.

Quote: Tanko

Quote: billryan

Buying a house and renting it out can be a good investment. Buying a house and living in it is not the same thing.
link to original post

Either way, you are building equity. In most cases building equity on the total value of the property with an initial investment of only a fraction of the total value.

Quote: billryan

A renter knows exactly what his housing costs are for the length of their lease.

And the landlord knows exactly how much to increase his rent when the lease expires. Rents are increasing faster than home values.

'According to Federal Reserve and National Association of Realtors data, the typical U.S. homeowner has a net worth of roughly $430,000, while the average renter has a net worth of about $10,000. This means homeowners are roughly 40 to 43 times wealthier than renters'
link to original post

That statistic is meaningless. Middle class and up are more likely to be a homeowner than are poor people. Poor people are nearly 100% renters with zero net worth, which pulls down the average renter net worth figure.

Your primary residence shouldn't count towards your liquid net worth, which is the only one that really matters.

Quote: gordonm888

As far as I can remember, home ownership has been considered to be a great. investment.

link to original post

As far as we can remember that's true. It's hard to believe but if you bought a house almost anywhere in the United States in 1900 in 1940 it was worth about what you paid for it or maybe less than you paid for it. Real estate just didn't go up that much until after World War Two. It didn't really start skyrocketing until the 1970s. So buying a house in 1900 was not considered an investment because it did not increase in value and because of inflation it actually decreased in value. Buy it for $3000 Sell it for $3000 in 1940. You just lost a bunch of money. Very hard to wrap your mind around these days. The real value in owning property was always being a landlord, that goes back thousands of years.

It's psychological and cultural that we see buying real estate (especially a residence) as this noble, respectable accomplishment, but it really is a speculative investment, and where mortgages are involved you are borrowing money with which to speculate.

Is there any other instance in personal finance where that is considered a good idea? I can't think of any. Sure, it can be a good investment, and your chances of your house being worth more in the future are quite good.

Also- they say I'm pretty good at blackjack and the chances of me being ahead after 6 months to a year of play are also quite good. Anybody want to lend me money to play blackjack? We might both be called deviate and degenerate if you did, and no bank would. But other than some moral stance how is that different than lending me money to buy a house, knowing that real estate value could go down the toilet and that I can't control that any more than I can control the dealer's cards?

There is a certain sense of stability or permanence that owning may give you that renting will not.
That’s worth something, at least to me.

Recently had to replace fences and 35+ year old furnace/AC unit.

$2.5K fence with one neighbor
$3K asbestos removal on ducts under house
$19.5K new furnace/AC heat pump unit
$3.3K fence with neighbor on other side (it was falling apart)

I feel like Tom Hanks and Shelly Long!

Quote: SOOPOO

There is a certain sense of stability or permanence that owning may give you that renting will not.
That’s worth something, at least to me.
link to original post

I hear that a lot, mostly from elderly people. There can be some non-financial reasons why someone wants ownership.

I looked it up yesterday, and my parents' old house was built in 1927 and first sold in 1928 for $ 19,999 with a $500 furniture allowance. It was the base model, except for the two-car garage that cost an extra $650. It sold again in 1947 for $22,000. It next sold in 1961 for $23,500, in 1968 for $25,500, and then in 1973 to my parents for $32,000.
My Dad died in 1978, but that summer we had a laugh about the people across the street who paid $105,000 for a similar house. My parents were the sixth owners, and none of the previous owners did particularly well financially by selling. We sold the house after my mom died for $420,000. Over forty years, she paid annual property taxes, thirty years' worth of interest, replaced the roof and the boiler, went through multiple appliances, and re-did both the kitchen and the main bathroom. She also had to redo her sidewalk twice. Houses on the block are now selling for over $600,000, but her model is going for about 500K. Forty years ago, my neighbors bought the biggest model on the block for $39,000 a year after we moved in. $7,000 more got them an extra bedroom, a finished basement, and a family room. Today, the gap in the houses is at least $100,000.
My grandmother's house was built in the 1890s, and she bought it around 1912 for $8500. They built a large extension, ripped down a stable, and built a three-car garage before selling the house in 1965 for $14,000. They bought the Garden City house for around 28,000 in 1965 and sold it for $880,00 in 2017.
Pre-1960ish, houses didn't seem to appreciate anything as they have since then.

In 1945 my grandparents sold the farm in West Virginia and paid cash for a house in Delaware about 15 minutes from the ocean. It was built in 1900 and was a gigantic 3 story house with dormers on three sides and Bay windows on two sides. Had a giant staircase in the front and a servant staircase off the kitchen. There was another wide staircase that went up to the 3rd floor. They paid $9000 for it in 1945. My grandmother had to go to a nursing home and she sold it in the early 1970s for around $20,000. Last time I looked it up on Zillow its value was 1.5 million. We used to go on vacation there in the 1950s and early 60s almost every year and that house was wonderful. My great grandfather and my grandfather would sit all day by the Bay window in the dining room in their rocking chairs and read paperback westerns while smoking their pipes. It was like a Norman Rockwell painting, people actually lived that way. In the late 1950s they got a small black and white TV and they only watched two TV shows. Gunsmoke and Bonanza. My great grandfather was born in 1870 and my grandfather in 1886 and the Wild West was still going on when they were young and it was a gigantic part of the myth of America at the time. In mid 20th century they were still beguiled by it.

As a child I remember seeing my parents mortgage. I believe it was $79 a month. It was definitely less than $100 but I think it was $79.

In the late 1960s, the father of a classmate died in a car accident, along with one of his sons. He left a large family behind. The Knights of Columbus offered to make interest-only payments on the family mortgage for an extended time. It wasn't much more than a dollar a day, as I remember thinking that for $3 a day they could pay it off, and there were hundreds of members.
It was a very different time.

Quote: DRich

As a child I remember seeing my parents mortgage. I believe it was $79 a month. It was definitely less than $100 but I think it was $79.
link to original post

Our mortgage in 1959 on the house I'm living in now was $60 and it remained $60 till it was paid off in the 1970s. But gas during that time was 30 cents a gallon and you can could buy three lbs of ground beef for a dollar.

Quote: EvenBob

Quote: DRich

As a child I remember seeing my parents mortgage. I believe it was $79 a month. It was definitely less than $100 but I think it was $79.
link to original post

Our mortgage in 1959 on the house I'm living in now was $60 and it remained $60 till it was paid off in the 1970s. But gas during that time was 30 cents a gallon and you can could buy three lbs of ground beef for a dollar.
link to original post

Sounds great by today's standards, but back then the average person made $200 a month.

Quote: KevinAA

Quote: EvenBob

Quote: DRich

As a child I remember seeing my parents mortgage. I believe it was $79 a month. It was definitely less than $100 but I think it was $79.
link to original post

Our mortgage in 1959 on the house I'm living in now was $60 and it remained $60 till it was paid off in the 1970s. But gas during that time was 30 cents a gallon and you can could buy three lbs of ground beef for a dollar.
link to original post

Sounds great by today's standards, but back then the average person made $200 a month.
link to original post

Not quite. In 1960 my dad was a factory worker and he made $5000 a year which was over $400 a month before taxes.

Quote: KevinAA

Quote: EvenBob

Quote: DRich

As a child I remember seeing my parents mortgage. I believe it was $79 a month. It was definitely less than $100 but I think it was $79.
link to original post

Our mortgage in 1959 on the house I'm living in now was $60 and it remained $60 till it was paid off in the 1970s. But gas during that time was 30 cents a gallon and you can could buy three lbs of ground beef for a dollar.
link to original post

Sounds great by today's standards, but back then the average person made $200 a month.
link to original post

In 1965, the Federal Minimum wage was $1.25 an hour, or $50 a week. That's $217 A month, but only a small percentage of the work force makes minimum wage.
In 1975, I had an after school job that paid $1.85. Minimum wage went to $2.10 and my boss cut my hours.

Quote: billryan

Quote: KevinAA

Quote: EvenBob

Quote: DRich

As a child I remember seeing my parents mortgage. I believe it was $79 a month. It was definitely less than $100 but I think it was $79.
link to original post

Our mortgage in 1959 on the house I'm living in now was $60 and it remained $60 till it was paid off in the 1970s. But gas during that time was 30 cents a gallon and you can could buy three lbs of ground beef for a dollar.
link to original post

Sounds great by today's standards, but back then the average person made $200 a month.
link to original post

In 1965, the Federal Minimum wage was $1.25 an hour, or $50 a week. That's $217 A month, but only a small percentage of the work force makes minimum wage.
In 1975, I had an after school job that paid $1.85. Minimum wage went to $2.10 and my boss cut my hours.
link to original post

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