Has anyone here considered renting?

[billf]

Hi everyone,

I was browsing through the new MLS/Realtor site, looking at the rents around some of my properties and I decided to check out the rents in some of the areas I could not afford but would love to live in(maybe one day)---translation Million Dollar Homes by the water. I was shocked by the low rents being asked. I know for a fact that some of the houses I was looking at were worth 700-900 thousand and were only asking for rents under $2000.00 a month. The taxes on these places would be $600 a month or more.

I live in a small place with my kids in a good neighbourhood, but the carrying costs on a 200,000 thousand mortgage over 25 years with taxes and maintenance add up to the same price as stress free living by the lake in a mansion(well giant home anyway).

Just wondering if you have any thoughts on the topic.

Bill F.

PS-If I ever moved, I would rent out my place and get almost the same rent for a house 1/3 the cost.

 

[RebeccaBryan]

Bill,

I`m not sure where to begin with this answer. The short answer is NO NO NO...... unless you are renting a vacation house for a few weeks to enjoy with your family.

The reason you want to own real estate has to do with building equity. Worry about living in a fancy home when you can actually afford it. People who live beyond their means go around in circles and never get anywhere.

 

[MONEY]

QUOTE (billf @ Jan 16 2009, 08:10 PM) Hi everyone,

I was browsing through the new MLS/Realtor site, looking at the rents around some of my properties and I decided to check out the rents in some of the areas I could not afford but would love to live in(maybe one day)---translation Million Dollar Homes by the water. I was shocked by the low rents being asked. I know for a fact that some of the houses I was looking at were worth 700-900 thousand and were only asking for rents under $2000.00 a month. The taxes on these places would be $600 a month or more.

I live in a small place with my kids in a good neighbourhood, but the carrying costs on a 200,000 thousand mortgage over 25 years with taxes and maintenance add up to the same price as stress free living by the lake in a mansion(well giant home anyway).

Just wondering if you have any thoughts on the topic.

Bill F.

PS-If I ever moved, I would rent out my place and get almost the same rent for a house 1/3 the cost.

Go for it. Your `tomorrow` in life isn`t guaranteed, so enjoy what time you do have.

 

[AndyLuchies]

If rents are same, it doesn`t seem to make a difference; however,
wouldn`t you be affected (taxes) when/if you sell because its not your primary residence?

 

[EdRenkema]

QUOTE (RebeccaBryan @ Jan 16 2009, 09:41 PM) Bill,

I`m not sure where to begin with this answer. The short answer is NO NO NO...... unless you are renting a vacation house for a few weeks to enjoy with your family.

The reason you want to own real estate has to do with building equity. Worry about living in a fancy home when you can actually afford it. People who live beyond their means go around in circles and never get anywhere.


This is accurate in my mind and it is a fact any financing institution will see you as an investor as more stable if you own rather than rent. Also consider tax implications, if you place a HELOC on your principal residence for investment purposes while aggressively paying down the mortgage you are effectively making your mortgage tax deductible.

 

[Dan_Eisenhauer]

Now for the other side of the coin.

I am currently renting. I have been using all my available cash to buy income property, rather than a non-income producing asset. I also drive a 15 year old Camry that is in great shape and does not need replacing, for the same reason. Eventually I will get around to owning my personal residence and new car again, but I don`t see it happening for another 2 - 3 years.

If you come out ahead in the transaction you describe to us, go for it. What happens to your cash flow if you do it? What about your taxes? Making your home tax deductible by renting it will have some advantage.

Rebecca and Ed bring up a good point, though. What is your long term goal, your personal Belize? Does this move take you in that direction, or farther away from it? That should be your overriding consideration, IMHO.

 

[RedlineBrett]

I have some clients that are renting. They are doing so because they think the market has some more to drop and are content to live cheaply until they can get the deal they want.

But they live in modest rental properties. Not mansions by any stretch. If you can get a mansion for 2000/month I think you would be better suited to finding something smaller for 1000/mo and tuck the difference away to use as DP capital for your next home or investment property.

 

[GarthChapman]

In short, yes, but only if:

If you can live more cheaply by renting and,
If you will diligently save or invest the difference and,
If the amount saved is significant enough to acceptthe short-term consequences and,
If that investment will get you closer to your goals than the alternative would

Then sure, why not...

 

[ChrisDavies]

QUOTE (Dan_Eisenhauer @ Jan 17 2009, 08:53 AM) Now for the other side of the coin.

I am currently renting. I have been using all my available cash to buy income property, rather than a non-income producing asset. I also drive a 15 year old Camry that is in great shape and does not need replacing, for the same reason. Eventually I will get around to owning my personal residence and new car again, but I don`t see it happening for another 2 - 3 years.

If you come out ahead in the transaction you describe to us, go for it. What happens to your cash flow if you do it? What about your taxes? Making your home tax deductible by renting it will have some advantage.

Rebecca and Ed bring up a good point, though. What is your long term goal, your personal Belize? Does this move take you in that direction, or farther away from it? That should be your overriding consideration, IMHO.

I`m in a similar situation, renting and driving a 1996 Civic hatchback. It`s a short-term strategy, part of which is it keeps my debt service ratio lower.

 

[Nir]

Bill,

I`m renting but for different reasons - the reasons Garth very well summarized.

I`m driving a 2002 Golf TDI (that I own) for the reason Chris mentioned PLUS its superb fuel efficiency - in line with my requirement to drive a lot. IT`S ALL ABOUT CASH FLOW!!! ...for me anyway.

Also, I really like Thomas Beyer`s reminder that even with zero appreciation you will still own all of your properties without a mortgage after around 25-35 years depending on your amortization.

In your specific situation it doesn`t sound like such a move would bring you closer or farther from achieving your goal because you mentioned around the same expenses in both cases. So for better quality of life why not. HOWEVER, although I don`t know your area, based on the prices you mentioned why not live in a place "only" half the size of a mansion and reduce your current expenses by half!? now we`re talking

Good luck,
Neil

 

[housingrental]

I think other posts have covered most issues but one left unmentioned...
9/10 times in those cases the house is waiting to be either
a) knocked down - and new 6000+sqft going in soon enough = you booted out
b) owner returning out of country = you booted out
c) resold after few year hold for land appreciation = you booted out see a)

 

[invst4profit]

Yes.
If you have reached a financial position in life that the cost is affordable why not rent a
mansion.
Personally although I do own my own home the bank owned most of it as it is refinanced to purchase
investments. Other than for refinancing purposes I consider it a liability and if I could do over I would concentrated on investing young rather than buying a home. My goal would have been to rent the nicest property I could afford.

I drive a 1990 Grand Prix with over 300,000Km. Probably replace it with something from 2000-02 for under $4000 this spring.

 

[celinajones]

If you will live in a house valued higher than 750K, better to rent as your payments will be significantly lower. If you will live in a house lower, better to own, considering current interest rates. Also keep in mind that if you purchase a high end home you will likely wish to renovate every several years, which will add another couple hundred grand out of pocket every 7-8 years. If you rent, you can move to a newly reno`d house without the hassle or expense. If property values are increasing, disregard the above but in the current market it`s better to rent a high end home than to own. Different if you will be living in an affordable home. Then it`s better to own, because the rent is more in line with the mortgage payment.

Celina Jones
Power Properties

 

[Thomas Beyer]

yes, financially speaking it makes more sense to rent a $1M home for $2500 or less than owing it, but owning a home is not only about money.

It provides a place to rest, to raise kids and dogs, to invite friends, to party when you wish, a place where YOU decide
a) what color the walls should be
b) if there should be a wall
c) if you like to add a pool or hot tub or 2
d) if the tree that blocks the view can be chopped down or not
e) if the kitchen needs remodeling
f) if the roof should be re-shingled or perhaps a metal roof is the better choice ...
...

all "fuzzy" things not so important for guys .. but usually my wife would have a (different) view on that !

Make a goal of owning a home with no mortgage (but a huge LOC, of course, that you may or may not tap into ..) .. and perhaps rent a place in Belize or Hawaii or PEI or Munich or Barcelona or Paris or a favorite semi-retirement spot !!!

 

[klewlis]

QUOTE (thomasbeyer2000 @ Jan 20 2009, 07:43 PM)
Make a goal of owning a home with no mortgage (but a huge LOC, of course, that you may or may not tap into ..) .. and perhaps rent a place in Belize or Hawaii or PEI or Munich or Barcelona or Paris or a favorite semi-retirement spot !!!






Rome!