Homes: Why own, when you can rent?

Rents are cheap. Homes are empty. 5% or more homes are empty. Rents are dropping. Home prices are dropping. Property taxes are about the same as rent per year in alot of markets, especially in the Northeast. To own and expose yourself to leverage in homes right now is crazy imo. With a new wave of foreclosures coming, I think still if you can sell, do so.

Rents are cheap. Homes are empty. 5% or more homes are empty. Rents are dropping. Home prices are dropping. Property taxes are about the same as rent per year in alot of markets, especially in the Northeast. To own and expose yourself to leverage in homes right now is crazy imo. With a new wave of foreclosures coming, I think still if you can sell, do so.

rents aren't dropping here....yet. in fact they've risen quite dramatically in the past couple of years. still, i hear what you are saying and in silicon valley this is the one of the few times you'll see where you can save fast enough to buy a home, which is really good news for home buyers.

i tell people this and i get that glazed bovine look because after the recent "pullback" in home prices they think prices will bottom soon and take off again.

i'd be surpised if we are 50% thought the price correction and when we hit bottom i think we stay in the trough for years. i.e., there'll be plenty of time to buy but it will be much later .

BTW we bought in 1999 at what we thought was the top of the market. we have since refinanced to 5.25%, 30-year fixed and we've extracted no equity.

now, i can actually rent my house out for a little more than our mortgage payment but if you factor in property taxes we probably "lose" $200 - $300 a month. but even after the correction we still have $300k equity and we paid $300k for the home.

i expect to see "lose" another $100k in equity of thereabouts.

so not bad.....but also very atypical for this area .

ed rader

Edited by ed rader, 04 May 2008 - 10:51 AM.

rents aren't dropping here....yet. in fact they've risen quite dramatically in the past couple of years.

DITTO HERE!

My long-time tenants are paying about $200 under the current market.
Time for a letter.

With 50 to 90 foreclosures a week, rentals are in high demand.

I know of tenants who have lived in the same rental home for 30 years.
All they have to show for it is a shoebox full of receipts.
While their landlord has nice income and equity.

Edited by Rogerdodger, 04 May 2008 - 10:59 AM.

My cousin paid 2500 a month to rent for a house in Milpitas, CA. Previously he owned similar house for 800,000. Paying 10,000 tax, plus 1,500 for HOA, 1,500 in insurance and a whoppping 5K a month in payment. Please tell me which one is better. Own or Rent? PS. when the house has water leak, he just calls the owner. I did not include a month maintenance on the house.

Edited by Mtrader, 04 May 2008 - 12:42 PM.

And I know landlords who are in court alot , pay alot of bills and repair damaged property caused by tennants. All these foreclosures and empty homes are adding big time to the rental space. Not sure where you live but these ghost towns will attract renters.

My cousin paid 2500 a month to rent for a house in Milpitas, CA.
Previously he owned similar house for 800,000. Paying
10,000 tax, plus 1,500 for HOA, 1,500 in insurance
and a whoppping 5K a month in payment.

Please tell me which one is better. Own or Rent?

PS. when the house has water leak, he just calls the owner.
I did not include a month maintenance on the house.

anytime you buy high you get screwed. as a trader you should know that. there are plenty of people around in ownership situations like your cousin, and they are screwed. i've been saying that for years on this board .

ed rader

Nope, rents aren't dropping where I am either. And I've never seen rent lower than property taxes, ever in my lifetime. It's undoubtedly cheaper to rent in California than to buy. Long term though renting in California has been a very bad idea. Maybe this time it's different. Meanwhile, I've owner rental properties for years. Thankfully there are some around who prefer to rent. I give em what they want. In return, I have a number of fully paid for houses...paid for by the tenants. IT

I have an uncle who was a slum lord. He bought distressed properties near USC (pretty much low income neighborhood), then rented them out. He was a multimillionaire on paper until the Rodney King riots. The damage done to his property was extensive, and even with insurance, he never recovered. Now he owns just two homes in the mountains doing a bed and breakfast. He had humble beginnings. He was a soldier, then became a sheriff deputy, then went into realestate during the early 80ties. As with many things, there's opportunity and with that comes risk. There's no such thing as 'risk free' in investment. The big problem with california is when a real recession hits it. Back in the 90ties, aerospace companies shut down in droves. That made people move out of the state. You realize how hard it is to switch your career after doing it for 10-20 years? What would be the catalyst in california for the next recession? My only uneducated guess would be housing related, but I have no clue. People who can't afford to pay mortgage or rent due to no jobs.. thats what kills realestate.

My friend moved to Houston area and pays about $1,200 a month for a very nice place. Moved from the NY area. His taxes in NY were more than he pays in rent now. I saw in Vegas I can rent from $800 to $1000 and get a nice place, 3 bedroom. I would imagine rents will be available everywhere in pretty low ranges. I looked at new builds in Houston and they wanted around $6000 in property tax. Thats alot of months rent for nothing. Houses are pretty cheap down there, but why bother. You can rent something really nice for $800 or so. Going forward I see homes as dead money. At least for the next 5 years, maybe 10.

In my area the average wages are roughly $48k/year/individual and $70k/family Prudent wisdom says you should not buy a house more than 3.5 times your annual gross income. 3.5 x 70k = $245,000, yet average homes sell for $350k+ So, it is safe to say home owners are over their heads here. Also I used "family" income which is risky since one of the wage earners could get sick, pregnant, laid off or disabled. My guess is home prices will stagnate compared to inflation until wages catch up.