Renting vs Owning

[Henry17]

I really want to buy but I can't justify it finacially. I don't think I'm missing anything but just in case.

Appreciation - property taxes - condo fees + rent saved - opportunity cost on capital tied up - interest costs on any mortgage.

If the number is negative then that is how much I'd lose by owning vs renting.

Is there something I've neglected?

[skindog]

- closing/transaction costs, which often shift the balance in favor of renting if you're staying for a short time, or in favor of buying for longer periods... It really depends on the length of your stay.

[Henry17]

Looking at 8-10 years so transaction costs would be negligible when amortized over that many years. Still I'll add them just for the sake of being complete.

That though increases the renting position. I'm really hoping I missed something that would increase the buying argument.

[mtgordon]

Some things that probably aren't applicable to your situation but I'll throw out there for the sake of the argument: renting out part of the property and making improvements to the property that increase value more than the cost of the improvements.

One that might be applicable is that you get a tax break when you're a home owner. I'm not exactly sure how it works but I think you can write off the house as depreciating or something.

[spider]

Mortgage interest & property taxes are deductible so if you itemize, you can assume after tax costs of those items are around 30% less (depending obv on your marginal rate, state tax rate, etc.).

But hey, I'm not trying to talk you into buying. Prices have come down a little bit, but are still high in general IMO. Renting is a better financial option for a lot of people nowadays.

[ahnuld]

cost of lack of diversification among your assets (not necessarily true if you have a big portfolio but RE represents 100% of some peoples wealth allocation)

[Badger]

[ QUOTE ]
Some things that probably aren't applicable to your situation but I'll throw out there for the sake of the argument: renting out part of the property and making improvements to the property that increase value more than the cost of the improvements.

[/ QUOTE ]
I believe there was a lengthy discussion here not too long ago about buy vs. rent. One of the arguments for renting was that very few home repairs/remodels will increase the value of the home more than you put into them.

I'm pulling numbers out of my ass here, but I believe claims were made that the value added by most home repairs was 50-90% of the cost of the work.

[Henry17]

[ QUOTE ]
Mortgage interest & property taxes are deductible so if you itemize, you can assume after tax costs of those items are around 30% less (depending obv on your marginal rate, state tax rate, etc.).

[/ QUOTE ]

I should have mentioned I'm Canadian so no tax deductions. In fact I'd lose the tax credit I currently get for paying too much rent.

Roommates are not something I'd consider and the place I'm looking at is new and quite nice so any improvements would be more for personal taste and a negative finacially.

[ QUOTE ]
But hey, I'm not trying to talk you into buying. Prices have come down a little bit, but are still high in general IMO. Renting is a better financial option for a lot of people nowadays.

[/ QUOTE ]

I use to own but I've been renting for 8 years. I've paid out $259k in rent and if I stay another 8 years that will be another 1/4 million plus. It seems counterintuitive that the correct decision is to pay out 1/2 million and have nothing to show for it at the end. The math says I should keep renting.

[spex x]

[ QUOTE ]
I really want to buy but I can't justify it finacially. I don't think I'm missing anything but just in case.

Appreciation - property taxes - condo fees + rent saved - opportunity cost on capital tied up - interest costs on any mortgage.

If the number is negative then that is how much I'd lose by owning vs renting.

Is there something I've neglected?

[/ QUOTE ]


You forgot insurance, which is a not-insignificant expense. You also forgot that it is possible to buy properties for less than fair market value, giving you immediate equity. Or you could buy a property for FMV and then improve it to create additional value - zoning changes are your most likely candidates for this in your situation. Tien, I believe is Canadian, and a RE investor that might be able to help you find a cheap decent property, or otherwise have some good Canadian advice.

[AbreuTime]

[ QUOTE ]
It seems counterintuitive that the correct decision is to pay out 1/2 million and have nothing to show for it at the end. The math says I should keep renting.

[/ QUOTE ]
Hopefully, you won't have nothing to show for it; you should have a portfolio of assets which you invested instead of paying a higher mortgage....

Some people lack discipline wrt to investing the difference between rent and mortgage, and so the mortgage can be seen as forced saving. This "benefit" to buying should only be considered if you are applicably lazy, which it probably isnt if you're actually going through the trouble of comparing costs.