Is home ownership a good idea for everyone?

[Nika]

If you do not consider the "forced savings" aspect of it. Yes, it is a good idea since majority of people are not good savers, and equity building is a significant portion of their net worth... But if you are a disciplined saver, is a primary residence still such a great investment?

Most people will say, I bought this house for X, and just 10 years later is is worth Y. So Y-X is the profit, and it is pretty good. But they do not deduct how much they actually have been paying on it(all that interest), maintaining it, landscaping, taxes, insurance, each year. Also, realtor fees and costs associated with buying and selling.

Is it still such a good investment in an average market? (I'm not taking about buying in hot areas, as those can be hard to predict.)

We are really enjoying living in a brand new luxury rental in DC, and there are no comparable alternatives that we could own. It is not that we can't afford them, is that they don't exist in the "walk to work, walk to shops, walk to grocery, walk to mall" area we like.

This lifestyle is awesome. I'm comparing this to a co-op we own in NYC, and I find I am enjoying renting much more. But owning is considered a major step to financial success for middle class.

[Guppy Tender]

There are different ways to look at home ownership

Yes, there is a bunch of extra expenses with owning a home. There is also the possibility of offsetting a bunch of these. I am single, so I have been renting a couple of rooms in my house to a couple guys, this pays me enough to cover the mortgage payments.

Once the house is paid off, my rental fee of sorts will be the property taxes and any repairs that the house needs. Still these will very likely be much less than renting anywhere. Yes, I will also have Utility expenses, but you have these when you rent as well.

Owning a house also gives a permanent home base, no one can say "not renting the place to you any more". Plus, you get to say what colour you want the walls, and I don't like that tree-so bye bye tree. I really want a front deck on my house(covered front porch area to sit and read a book), this will happen someday.

There is good things in renting as you have a set amount you pay each month(though this can go up quite a bit, unexpectedly, has happened to a couple of my friends lately). Someone else worries about unexpected repairs. Can move to different place quite easily. Plus as Nika has previously said sometimes there is no where that is reasonable to buy, where you want to live.

So part of it is investing in future when you own a home. The other part is a type of freedom to make changes, and a security in knowing this is my place.

[TexasHusker]

The opinions vary on this.

Strictly speaking, a principal residence wouldn't be considered an investment in my book. That is because:

1. It can't return you anything unless you sell it, at which time you will likely turn around and spend the proceeds on yet another personal residence.

2. You spend far more on the home than it can hope to return some day. Taxes, insurance, repairs, maintenance, etc. eat up any capital gains.


However, even though I don't consider a principal residence to be an investment, I do consider it a superior choice to renting:

1. You certainly do build equity in the home, that you can later use. I used my equity to buy a rental home, and ultimately used that equity to launch businesses.

2. Your home almost always appreciates over a long period of time, which means more equity.

3. Other than taxes and insurance, the payment stays constant, while inflation pushes rents up 2-3-4 percent per year. That adds up pretty quickly.

4. You can live in your principal residence for the rest of your life. If you live in a rental, you live there until the landlord sells it, unless the new owner wants you to stay.

[disneysteve]

However, even though I don't consider a principal residence to be an investment, I do consider it a superior choice to renting:

4. You can live in your principal residence for the rest of your life. If you live in a rental, you live there until the landlord sells it, unless the new owner wants you to stay.

Whether owning is better than renting really depends on your situation and the specifics of your comparison.

My parents bought their house in 1955. My dad died in 1992 and my mom remained in the house until around 2008 I think. At that point, she was in her 70s and the house was just too much for her. Also, the neighborhood was going downhill and we didn't feel it was safe for her to stay there. So she moved to a senior apartment building. Her rent is less than what she was paying for property taxes and upkeep on the house, so financially she came out ahead. Plus she got the money realized from the sale to boost her nest egg. And now she has no worries. If something breaks, she calls the office and they get it fixed. She doesn't have to get the lawn mowed or the snow shoveled. She doesn't have to deal with a leaking roof or a clogged drain. She's now 86 and I can tell you that ownership at that point in life isn't necessarily such a great thing. There are a lot of advantages beyond the monetary savings to her being in a rental.

[rennigade]

This should be moved to the "real estate investing" section.

[Captain Save]

No financial tool is the best for Everyone ......

There are too many variables with people's lives.. that's why I hate generic advice ..especially generic financial advice..

You should know the advantages and disadvantages of owning a home and the downsides.. just like eveyrthing else.

Pros
1 - it's an appreciating asset unlike the alternative (renting)
2. - It's also something you can call your own. You can personalize it to your own liking (to a certain extent) .. more so than an apartment
3. When you do build equity. .it opens you up to a lot of options though you have to be cautious

Cons
1. You have unpredictable expenses..
2. It might tie you down. Let's say you live in your home but you have this opportunity somewhere else that 's not as convenient. You would most likely decline that opportunity which could cost you a lot of money.
3. It would most likely cost more in the beginning than a rental equivalent.


I"m sure I'm missing a couple of bullet points on both side.. but what you do is apply these pros and cons to your own situation and see if it's a good idea. For example. If you don't see yourself needing to move in the future.. (although no one can predict the future) .. it might be a good idea.

[disneysteve]

This should be moved to the "real estate investing" section.

It isn't focused on buying a property as an investment. It's talking about the "investment" value of your primary home which isn't actually an investment at all. It's also asking a different question regarding if home ownership is the right move for everyone. So I don't think it belongs in the real estate section.

[97guns]

IMO renting a home is flushing money down the drain, sure there are expenses with ownership and it will cut into your gains but when you rent you will never see any gains

[disneysteve]

IMO renting a home is flushing money down the drain, sure there are expenses with ownership and it will cut into your gains but when you rent you will never see any gains

It's not that simple, though. There are plenty of times when renting makes more sense to the situation. I rented from the time I graduated college in 1986 until I was married and we bought our home in 1994. Buying before that would have made no sense at all because I had no idea where I was going to end up working. And I already gave my mom's example. For seniors, renting can often be a far better option than owning.

[~bs]

buy vs rent can quickly turn into a pissing match. seen it happen on other forums many times.

I'll just say it is not for everyone. Both have advantages and disadvantages, and you need to evaluate them for your own personal situation.

[SueInBoston]

Interesting...I'm currently struggling with this decision

I live in a very expensive desirable neighborhood with excellent schools

I live in a 2bed/2bath/study condo assessed at 700k

I owe 350k for another 27 years

Both children will likely move out within next 12-24 months

half of my paycheck goes to house payment, i feel like i'm house poor

I can sell and get about $750 but I won't be able to afford anything else around here.

I can rent it out and the rent will cover mortgage and condo fee with maybe $500 income.

I love my home and neighborhood but I feel it's too much home $$ for me.

[Outdoorsygal]

Owning a home is not for everyone. Get creative and you can save alot of money. There are many different routes to get your needs for shelter met, while making $$



Building a 300 sq foot home with high ceilings will due for us. We will save 30K in building fees by keeping it that size. It already shows that sized home on the land from 1920.

To fully pay off any mortgage is not a task I would like in this stage of life. $50 month property taxes, capped always at 1% in California (can you believe it?) is right up our alley.

This "tiny" home would bring the property we bought for 50K to 200K. High ceilings with a loft. A few other structures will be built, one is a similar tiny home to rent out. He will do most of the work.

We qualify for a loan so as we see a good deal, will probably buy but only to flip. Own for a few yrs then sell it. Do this a few times to supplement retirement savings.

[disneysteve]

I can sell and get about $750 but I won't be able to afford anything else around here.

I can rent it out and the rent will cover mortgage and condo fee with maybe $500 income.

I love my home and neighborhood but I feel it's too much home $$ for me.

How much would it cost you to rent a 1-bedroom place just for yourself?

[SueInBoston]

in my neighborhood, one bedroom goes for about 2500.

I can move farther out and pay about 1800, but then I will lose about $500 income from my 2nd job. (job is close to home, but wouldn't be worth it if I have to travel)

The reason that got me thinking is that there are currently units in my building selling for 550k (1 bed), 685k - (2bed- sold in 1 weekend) 999k (same size as mine, but renovated)

p.s. I would have to renovate to rent, That would be 100k

[AJ444]

Renting is better for some people, owning is better for some people.

My wife and I owned our townhome outright and decided to move last year, we ran the numbers and decided to rent at our new location and plan on doing so for the foreseeable future.

Homes do not always go up in value either, a lot of people were hit hard by the housing crash of 08 when their planned forced savings turned into walking away or taking a loss to sell. We sleep very well at night not owning, especially in Illinois.