Quote:
Originally Posted by TheRitsman
I think people do not appreciate how much money is involved in real estate. My family essentially bought a place for $200,000 that increased in value by more than double in 20 years. Making $300,000 extra over 20 years is a lot of money, and that wealth just sits there until they decide to use it. If they had rented those 20 years, they would be paying more rent now than then, they likely would not have upgraded, and 20 years of paying rent would have been money wasted.
When people tell me that renting can be better than owning I personally think they're insane. Unless there is a major crash and you couldn't afford the mortgage in the first place buying is always better. You don't even have to live there. Rent it out to someone else, and rent yourself somewhere cheaper so it's easier to move for work and such
|
I find it insane when people don't look at ALL the costs involved in renting vs. owning.
One can't just compare rent vs. mortgage payments and how much equity a homeowner accumulates.
To make a full comparison, we need to factor in property tax, utility costs, annual maintenance costs (either out of pocket for a freeholder, or in condo fees), and periodic repair/replacement/rehab costs. There are lots of other things that people don't often consider too: homeowners tend to need purchase and maintain things that renters do not if they're in a multi-unit building, such as major appliances, lawnmowers and other garden equipment and tools, some have snowblowers, etc. Depending on the comparison being made, larger spaces may demand more furnishings, and be more costly to redecorate from time to time.
There's also the value of time put into taking care of a property... a homeowner doing it themselves won't be paying money for this service, but their time has a value.
Inflation is a biggie too. That "$300,000 extra over 20 years" is a lot, but the purchasing power of that money erodes substantially over that period. A renter who is able to save the difference between home ownership and their rental costs does need to invest that savings wisely, otherwise yeah they have nothing to show for it compared to the homeowner, but they could end up with something comparable or larger than that change in wealth related to home value.
It's not a simple comparison. It also depends what is being rented, and the space needs of the renter and their family... Someone renting a 3 bedroom detached home may be paying a lot more of those additional costs than they would renting a 3 bedroom apartment.
Bottom line to me: sometimes it makes sense to rent, sometimes to buy, but it depends on the individual/family and what they need, and their existing financials and future plans as well.