re: 5 Reasons Renting Still Beats Buying

You never have to pay the 8K back?

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You are incorrect for a very specific reason: you have to make a mortgage payment every month. That's not included in your example. And if you are claiming that it IS included, then your example is just really stupid.

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Ok, tell me if you understand this.

BUY:

160k home. mortgage + all escrow + rolled closing costs = 1050 a mo.

at five years, you have a 65k cost of buying.

at a quick glance of an amortization schedule, you now still owe 140k on the loan.


RENT:
1400/mo

80,000 cost
assuming no renters insurance)

ANSWER:

you've spent 15k more on rent than you have by paying your mortgage and escrow. You have also potentially built some equity in the home. You now owe 140k, theoreticly, you make 20k.

So in order for the renting to be considered a better deal, you would have to realize a $35k loss on the home (22% loss)

If you think the chances of a <22% loss over five years are good, then rent. If you think the chances of a <22% or greater loss is poor, then buy.

WTF am I not getting?

im not saying this is by any means a comprehensive analysis, but just a rough way of looking at it.

You also have pride in home ownership and more freedom in how you choose to live. These factors non-quantitative factors cant have a value assigned.

This is also for a townhouse which is free from most big ticket repairs since that comes out of HOA fees.

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You also didn't mention anything about maintenance or insurance or property taxes.

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a slush fund for maintenance was not provided for, but the insurance and property taxes were included in the above mentioned escrow.

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So, I guess we can debate about whether or not the example is fair. In most areas, it simply is not.

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most areas in the nation, perhaps, but here in La, i think thats the norm as long as the house is not too big or expensive.

the past two years I've rented a 1500 sq foot house in BR for 1900 a mo.

I have seen this debate for a while now.

I think that the person who overpays for a home he buys, generally overpays for rent as well. Bargain hunters find a good deal either way whether it is renting or buying.

No matter how many angles you look at this these principles seem to be universal (aside from the occasional blind luck).

I will slip back to only reading for a while.

A few real world examples from BR off of Craigslist:

$1349 / 3br - NEWER HOUSE**NEAR LSU* (Nicholson Lakes).

LINK

Midrange of Zillow estimate is $198K. Just P and I will be at least $1K if not $1.1K. Throw in taxes, insurance, etc. and your monthly payment is equal to or greater than the monthly rental payment.


LINK




$1345 / 3br - Great House & Backyard, 3 BR 2-1/2 BA, Corner Lot (Sherwood Forest), 2300 sq ft. I realize SF is not what it used to be, but you get the idea.


I agree with you that Baton Rouge less out of whack on a price-to-rent basis than a lot of areas, though.

What planet do you live on that pays a 33% premium for renting over PI?

I can make up ridiculous ratios too and come up with whatever answer works

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33% more expensive? OK, so we don't need to go much further. I wholeheartedly agree that buying is much more amenable when rent means you pay a 33% monthly premium over P and I. So, I guess we can debate about whether or not the example is fair. In most areas, it simply is not.

You also didn't mention anything about maintenance or insurance or property taxes.

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There is also the whole down payment thing...

I'd hate to let go of 20K in liquid assets to tie myself down to some shitty 1200 foot house in Baton Rouge.

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What planet do you live on that pays a 33% premium for renting over PI? I can make up ridiculous ratios too and come up with whatever answer works

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that ridiculous planet of lafayette louisiana.

This is not a hypothetical, this is the actual figures of my townhouse, and I'm sure the figures of several more.