Sell or rent??!!
leigh m
6 years ago
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Denita
6 years agoAnglophilia
6 years agoRelated Discussions
Different question selling to rent.
Comments (125)I think most people in this thread are emphasizing that even though we own, from a purely financial perspective, typically owning is not the best financial decision. We realize that about ourselves and acknowledge we own homes for different reasons such as pride of ownership, not having to deal with landlords, etc. Housing doesn't decrease in value like, say, cars do. But housing typically gains value, on average, at a small rate, much smaller than investing in the stock market. The weird thing to wrap your head around is that, from an economic perspective, even a slight gain feels like a loss if you know you could be making a bigger gain somewhere else. The nest egg I have sitting in my house wants to get bigger. And from the egg's perspective, it knows it could be doubling a lot faster if I had it put somewhere else besides my house. That pain my nest egg feels by missing an opportunity to make even more of itself is called an opportunity cost. So even though my nest egg isn't getting smaller while it's sitting around in my house, it knows it could be getting a lot bigger if I had it somewhere else. The difference in returns between investing a chunk of money in a house and investing it in the stock market is so great that for most people, it more than makes the difference compared to the monthly out of pocket cost of renting. And actually the bigger the nest egg you had at the beginning (down payment) the more sense it would make to rent, because you'd be able to put more money to work for you sooner, covering even more of the rental costs. It takes a special person to be so financially prudent that they choose the wise financial decision over the emotional decision even when it comes to something so fundamental as where you live. Those people do exist, and they'll be retiring early and thumbing their noses at me from their suite balcony on their cruise ship as I keep whittling away at my job until I'm 70. This financially prudent person might not own a car and doesn't eat out a lot. Wine is right out for the most part. They lift weights at home instead of the gym. Their cell phone might still have push buttons. Their low cost lifestyle doesn't need a giant nest-egg to support it when they retire, so they're able to retire earlier. But the trade-off for being tighter than a gnat's butt is that they have increased freedom and financial independence and they accumulate wealth much quicker. They're the ant instead of the grasshopper. The person Pal described is a grasshopper. And sad to say, I'm probably closer to a grasshopper than an ant. But my father in law is a super ant so I get the best of both worlds. Governments have typically encouraged home ownership through social policy. However there is little overall evidence that high rates of home ownership are a social good. Indeed 2008 showed us that there are many people who wanted to own homes that likely should have been renters. For a good overview of the pros and cons of encouraging home ownership through public policy: http://www.economist.com/debate/days/view/882 To note, many very successful countries have very low rates of home ownership. In fact Switzerland and Germany have the lowest rates of ownership in the OECD, while Lithuania and Romania have the highest. Singapore has the third highest at 90% home ownership but they also have a unique view of government involvement in the housing market. 80% of the population lives in publicly built and funded housing....See MoreBuying or building vs. renting
Comments (37)"It was against the law what he did (the can only come in unannounced if given permission by you, or if emergency or abandoned home, etc)" It might be "against the law" om some place, but in most places it is just a violation of the rental contract. A civil action, but not a criminal action. You could sue, but what damages can you show? You could try to get the lease canceled since he violated the terms, but now you need another place to live. Do you really want to talk with them about a new lease? If you did try to press a trespassing charge (and could get the DA to prosecute it) you are liable to have a very rough lease period. Depending on local conditions it can be cheaper to rent than own (but rarely for very long" The market of rental properties will contract and rents will increase. The landlord may actually be losing money if they are paying a mortgage that is not many years old (and thus based on a likely lower purchase price). do not be foled about manintenace expenses (both for repairs ad yard wrk). if you are in a large building both are include din the cost of the lease. The 'yard work' charges may be smaller when shared over multiple units, but you are still paying a share of them. In a single family rental you are often required to do 'yard work' type things (shovel snow, mow the lawn, rake the leaves) and the maintenance costs are included in the lease. We had a young female tenant once that did not want to mow the lawn. We told her of course this could be arranged, but the rent had to be increased. She returned to mowing the lawn, raking the leaves, and shoveling the snow....See MoreSell or rent in Hawaii
Comments (11)Thanks - the reason I wrote was to get objective perspective - we are way to emotional on this. FYI - I didn't realize I would be asked to justify past decisions - Don't want to sound ddefensive - but here goes. I was transferred to Hawaii for my job, we werent sure if we would like it there so refinanced the CA house to use equity as down payment for the Hawaii house. We then rented out the CA house. Always knew that we couldn't afford both over the long haul - but got 5 year fixed IOs on both with great rates to buy us time to figure out where we wanted to be. We still have three years left (not two). The renovating was about me thinking I was keeping the house. (however with the market shift - selling would have been a bear at that price point without having the house in good shape). Job picture changed - I left my company to come back to CA and move into my CA house. The emotion comes in with really believing that over the long haul - this house / location will really appreciate big and we will probably never have the same opportunity again. (not to mention I love the house and living in Hawaii). In addition the IO loan won't put us underwater for three more years - until then we will be positive. I wasn't betting on the rental market, really just figuring out where we want to live. Now we are struggling with "letting go". I never went into this with an "astute investor" mentality (or I wouldn't have two expensive houses - we would be at the other end of the market for rentals). In addition, I have ready much about the economy - With the current issue with Jumbos - I am concerned that this may not be the moment to put this house on the market. I feel certain that the Jumbo market will open back up eventually - but the next six months or so may cause more pain. Thanks for helping me take the emotion out...See MoreSell or rent?
Comments (25)Here comes another argument... First, there are some very good reasons to own rental property as an investment but they may not be the things you are thinking. Some of the reasons that come to mind are (this is not an exhaustive list, others will have different advice and experiences, this one is mine): Rental property takes advantage of leverage better than most other investments. You can finance 80% of a rental investment which you can't do with a stock market investment. With $20,000 you can get a $100,000 capital assets with a 3% interest rate right now, that is really pretty good. Rental property lets you get a second job working for yourself. Rental property makes money the same way a job does, it lets you convert your time, effort and know-how into revenue. It is important to remember that rental property is a second job, and just like any job some people are naturally good at it, others are naturally bad at it, and just like other jobs experience matters. When you start you are going to make mistakes, as you learn you will make less mistakes, be sure that you are financially capable of absorbing those mistakes. It is an incredibly valuable experience. I believe (my opinion here) that people who are responsible rental property owners develop better spending and investing habits as a whole. I personally think it is hard not to, and prize it as one of my most valuable life lessons. However, there are some things that are also bad about it. Rental property is a job. It requires a lot more attention than traditional investing. It is not a good choice on a shoestring budget. A poor rental property owner is soon to be a very poor ex rental property owner. Houses require upkeep, houses you own and don't live in require more upkeep, houses you own and someone else lives in require even more upkeep...Upkeep is expensive. Bad houses can make great rentals, and great houses can make bad rentals. Renting is about attracting the right tenant for your price point. A lovely inexpensive home can easily turn into a not so lovely cheap home. The best tenants are typically people who can or soon will be able to afford homes but aren't buying for some reason. For less expensive rental homes they are pretty hard to find. Finally, some of the things you are saying really make me think that it isn't for you. It is not an amazing retirement investment. Assuming you have $20,000 equity in the home, taking that same $20k at your age and investing in a broad market mutual fund has averaged about $320,000 at age 67. Rental property can become an amazing retirement investment when you do smart things with the income. In and of itself, property is a rather lousy investment (here comes the argument). To clarify this, buying property in hopes that the appreciation will be an amazing investment hasn't worked very many places (there are times it has in California but that is the exception). Edit: A great thought experiment for you: First, think of the position you will be in if you buy another house without selling this one. Next, think of the position you will be in if you sold this house and bought another one. Now, if you didn't own any house at all which option would you pick? This is a way to remove the sunk cost fallacy from your decision making....See Moreleigh m
6 years agolast modified: 6 years agoDenita
6 years agoLaurie Schrader
6 years agohomechef59
6 years agoUser
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6 years agolast modified: 6 years agobiondanonima (Zone 7a Hudson Valley)
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6 years agoKathleen Squires
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