Cheaper to rent than buy a house?

[chequita guevara]

Originally posted by Flubber
Nope-- you go with option 3 and buy that house for 10K in year two. So you "wasted" 20 K on rent and spent 10 K for a 10 K asset for a total of 30 K spent and a 10 K asset.

Option four, buy the house year 1. Declare bankruptcy year 2 and buy the house for $10K. You've spent $20K and have a $10K asset.

[Flubber]

Originally posted by chegitz guevara
Of course, that assumes rent prices don't fall, which they would, but not as much, since rental owners would still be holding mortgages that needed to be paid. If rent prices fall by more than one half (and remain steady over the decade), then it's preferable to rent in your option 2 scenario.
.

Renters that have the means to buy don't care what a person's mortgage is . . . . Put simply, if a crash has occurred, I don't care that the owner paid 100K for the property and must service that mortgage. All I care is that I can buy a like property for 10K and I will do my comparison based on that.

rents may fall slowly due to rental obligations of existing leases BUT there is no way an owner will generally be able to get away with rents that are 4 or 5 times what the tenant would be paying in monthly ownership costs for a similar property

[Japher]

If the market goes from 100k to 10k I'd declare bankruptcy and buy a house for 10k cash for sure.

Property is good to own, even if the market drops (just not that much) because at least you can leverage a house. Equity is good for it can get you, not for just having it.

[Flubber]

Originally posted by chegitz guevara


Option four, buy the house year 1. Declare bankruptcy year 2 and buy the house for $10K. You've spent $20K and have a $10K asset.

Not bad except you have no assets and no credit to come up with the 10K-- If you have a big income your bankruptcy petition would be refused ( the law in your jurisdiction may be different but here you don't get to declare bankruptcy just because a debt is large--- )

[chequita guevara]

Course, if you could get a lot more for renting than for selling, I imagine that the housing market would dry up pretty quick, as owners decided it was better to rent than sell.

Wow, this gets pretty damn complicated pretty quick.

[Japher]

Wow, this gets pretty damn complicated pretty quick.

It gets pretty damn sucky pretty quick. All those ppl with mortgages AND savings will declare banckruptcy to get out of oweing their mortgages and buying places for cash (from their savings)... Talk about classes! Ppl who have already made money off of real estate will just be able to write of their debts on to the government and start over.

[Dinner]

Originally posted by Japher
If the market goes from 100k to 10k I'd declare bankruptcy and buy a house for 10k cash for sure.

Property is good to own, even if the market drops (just not that much) because at least you can leverage a house. Equity is good for it can get you, not for just having it.

Leverage is the #1 reason to own property. I put up slightly less then $100k (thank you dad) on my house yet I bought a $400k house. I get appreciation on all $400k even though only 25% of that money is mine; sure I have to pay interest on that loan but with equity and the 15% per year appreciation I'm doing very well thank you.

Let’s do the math. The interest probably costs me around $8k per year but equity goes up around $16k per year with appreciation adding up to $60k per year. I’m $68k per year ahead. A man can work his ass off and not make that much money per year.

[Flubber]

Originally posted by chegitz guevara
Course, if you could get a lot more for renting than for selling, I imagine that the housing market would dry up pretty quick, as owners decided it was better to rent than sell.

exactly. . . . if rents far in excess of all owership costs are readily available it makes no economic sense to sell

Originally posted by chegitz guevara


Wow, this gets pretty damn complicated pretty quick.

Not that complicated-- Its pretty basic economics--- rents and ownership costs can't get too too far out of whack or you get a movement from one to another and in theory this should result in a price adjustment. What gets complicated is if you throw in things like interest rates or even demographics ( we have talked throughout as if all renters COULD be purchasers which is an incorect assumption). Both of those factors can change the analysis with no change in rents or house prices.

WE have also talked as if renting and buying were just an economic decision and for many people it is not. To many, a "home" is much more than just accomodation.

[Flubber]

Originally posted by Japher


It gets pretty damn sucky pretty quick. All those ppl with mortgages AND savings will declare banckruptcy to get out of oweing their mortgages and buying places for cash (from their savings)... Talk about classes! Ppl who have already made money off of real estate will just be able to write of their debts on to the government and start over.

amd you might get away with it but not without committing a number of offences. Part of bankruptcy proceedings is making declarations as to your assets and sources of income. Hiding these would be an offence in Canada and I suspect under any bankruptcy law.

Bankruptcy should not be a carte blanche to screw your creditors . . . its supposed to be a last resort when you simply cannot pay your debts. There is no way you could have "savings" sufficient to buy a house without committing a fraud

[Japher]

Tell that to Trump

[Flubber]

Originally posted by Japher
Tell that to Trump

Way way way more complex than the average homeowner

[Kidlicious]

Renting is to working for someone else as home owning is to being selfemployed.

[Dinner]

Basically, yes.

[Flubber]

Originally posted by Kidicious
Renting is to working for someone else as home owning is to being selfemployed.

Ok . . . I may regret asking this but . . . so ?? Why does this matter??

I see both renting and working for others as acceptable alternatives . . Each involves less risks than than the other alternative and can have many benefits depending on a person's circumstance

[Japher]

You are arguing financial risks associated with buying a house vs. renting. Is there a greater risk in working for yourself vs. working for someone else? Not really, so I guess Flubber is right.

However, I feel, you can't win the game if you don't play the game.