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Old 04-21-2010, 09:02 PM
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Default Rent vs. Home Ownership Calculator



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There have been some heated arguments here about whether it is logical to rent or purchase your own home. It is a very complex calculation with many variables. Up to now I have not seen a calculator that could handle those conflicting options without being overly confusing.

Until now.

The New York Times created an excellent online calculator. Give it a try.

http://www.nytimes.com/interactive/b...ulator.html?hp

EDIT:
Be sure to click on the "Advance Settings" button on the top right to fine tune the calculations.
Also, be sure to scroll down to the bottom of the screen to see the spreadsheet.
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Old 04-21-2010, 09:25 PM
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It's always cheaper to add middle-men. Same applies to everything: rent your car, rent your guns, rent your food -- don't own anything. In fact, rent many times over (sub-leasing). The more middle-men the better! Stack 10 guys between you and the property and it gets *really* cheap.

Seriously, though, this is a complex equation. One unknown is the rate to which your landlord will be guaranteed to gouge you from year-to-year. Will he aggressively track the price of a starter home, and always peg rent at +/- 20% of a mortgage? Some rental properties in my city are much more expensive than starter homes -- go figure.

The championship of renting is sort of like the championship of serfdom. I imagine, as the economy continues to sour, we'll see articles on whether it's better to be a slave or in prison than be employed.

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Old 04-21-2010, 09:25 PM
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I thought there was a good one over at bankrate.com as well. That is a good site regardless though.
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Old 04-21-2010, 09:35 PM
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Originally Posted by aramchek View Post
It's always cheaper to add middle-men. Same applies to everything: rent your car, rent your guns, rent your food -- don't own anything. In fact, rent many times over (sub-leasing). The more middle-men the better! Stack 10 guys between you and the property and it gets *really* cheap.


We agree on much, but not on this. That's okay. I know the concept of renting is something to which you are very much opposed. That's okay too.

By posting this I am beating a horse we killed in a previous thread. I am doing so for good reason. It is very confusing. And every day we are bombarded with messages that smart people buy while only the poor idiots rent. This calculator shows very clearly that there are situations - many in fact - where it is far more prudent to rent than to own.
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Old 04-21-2010, 09:38 PM
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I'll gladly buy any property for someone on the street who's interested in renting instead of buying. I'll price him at 120%+ my costs.

What's in it for him? I mean, are you arguing that landlords absorb cost (either because they've long since paid for the property or they're offering charity to their renters)? Actually, I can think of one time when renting might result in saving cash: renting from a relative who's long since paid off his property. He might offer you a rate well below the price of a starter home, and you'll have the ability to actually save something. But I can aim you at 2-bedroom apartments half my home square footage with a rent much higher than my mortgage. Anyone who buys into that needs a checkup from the neck-up.

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We agree on much, but not on this. That's okay. I know the concept of renting is something to which you are very much opposed. That's okay too.

By posting this I am beating a horse we killed in a previous thread. I am doing so for good reason. It is very confusing. And every day we are bombarded with messages that smart people buy while only the poor idiots rent. This calculator shows very clearly that there are situations - many in fact - where it is far more prudent to rent than to own.
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Old 04-21-2010, 09:46 PM
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I'll gladly buy any property for someone on the street who's interested in renting instead of buying. I'll price him at 120%+ my costs.

What's in it for him?
Well, see, that's just it. I can tell you from good experience as a landlord you cannot just willy-nilly say I am going to set rents at 120% of costs. You have a ceiling on what you can charge, the market rent. So the renter is protected by the marketplace. They will go down the street and rent for a lower price. On the other hand the owner gets squeezed between his mortgage and costs on one side and the market rent on the other. Very often that squeeze is so tight there is not room between them. Often, but not always, the owner finances a portion of the costs
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Old 04-21-2010, 09:59 PM
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Default This is an example of a fallacy

It's called false dualism

EVERYONE CAN BUILD THEIR OWN HOME. They may not want to. They may feel unable to, but everyone can build their own home.

But instead they saddle themselves with debt or no possible way of earning equity... the sole advantage of being a homeowner in the current system in a SEA of disadvantages, not the least of which is the front end loaded mortgage interest, and crappy quality, and its inherent un-green-ness.

Meanwhile everyone thinks they HAVE to buy or rent. That may be true for a time, given a circumstance, but ultimately, over time its a patent falsehood.

Especially for a tract house.

Log
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Old 04-21-2010, 10:12 PM
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That reminds me... of one of the greatest advantages of renting that has nothing to do with cost.

Change happened slowly in the past. People stayed rooted in one place and what was good when they moved in 30 years ago was generally still pretty good when they died. Neighborhoods changed when the residents passed away.

Today change happens incredibly fast. Neighborhoods turnover in the blink of an eye. What was a good neighborhood five years ago might now resemble a ghetto.

If a person moves in next door who has loud parties until 5am on Tuesday night and sells drugs all day, the tenant can move with very few barriers to exit. The owner is jailed.

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Originally Posted by logrfood View Post
It's called false dualism

EVERYONE CAN BUILD THEIR OWN HOME. They may not want to. They may feel unable to, but everyone can build their own home.

But instead they saddle themselves with debt or no possible way of earning equity... the sole advantage of being a homeowner in the current system in a SEA of disadvantages, not the least of which is the front end loaded mortgage interest, and crappy quality, and its inherent un-green-ness.

Meanwhile everyone thinks they HAVE to buy or rent. That may be true for a time, given a circumstance, but ultimately, over time its a patent falsehood.

Especially for a tract house.

Log
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Old 04-21-2010, 10:44 PM
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Originally Posted by HowardRoark View Post
That reminds me... of one of the greatest advantages of renting that has nothing to do with cost.

Change happened slowly in the past. People stayed rooted in one place and what was good when they moved in 30 years ago was generally still pretty good when they died. Neighborhoods changed when the residents passed away.

Today change happens incredibly fast. Neighborhoods turnover in the blink of an eye. What was a good neighborhood five years ago might now resemble a ghetto.

If a person moves in next door who has loud parties until 5am on Tuesday night and sells drugs all day, the tenant can move with very few barriers to exit. The owner is jailed.

This is where buying a large plot of land comes into play...


Seriously though, I would purchase ten acres and throw a cheap double wide on there, so I could save money to build a home and then rent out the double wide....or destroy it.
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Old 04-21-2010, 10:47 PM
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You can buy "log" cabins for as low as 65,000 for a 2 bdrm, and buy 5-40 acres for 35,000 - 75,000 depending on locale. Now you've just made up the cost of buying a 3 bdrm 2 story house in the burbs.
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Old 04-21-2010, 10:50 PM
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I agree that there are often advantages to renting vs owning. The biggest is if the market value is way above the replacement cost. Another is if you are close to retirement and you want to lock in the capital gain before your local real estate market tanks.

On the other hand I designed my house 25 yrs ago and paid it off in 12 yrs. I suggest that if you are going to live in an area for a long time, paying off your house early and keeping it in good condition is really the best idea.
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Old 04-21-2010, 10:53 PM
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Quote:
Originally Posted by logrfood View Post
It's called false dualism

EVERYONE CAN BUILD THEIR OWN HOME. They may not want to. They may feel unable to, but everyone can build their own home.

But instead they saddle themselves with debt or no possible way of earning equity... the sole advantage of being a homeowner in the current system in a SEA of disadvantages, not the least of which is the front end loaded mortgage interest, and crappy quality, and its inherent un-green-ness.

Meanwhile everyone thinks they HAVE to buy or rent. That may be true for a time, given a circumstance, but ultimately, over time its a patent falsehood.

Especially for a tract house.

Log
In most cities in the country you cannot build your own home. They have a construction cartel backed by code enforecement that says you MUST have a licensed general contractor, electrician , HVAC, framer, etc. to get your house built.
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Old 04-21-2010, 11:16 PM
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In most cities in the country you cannot build your own home. They have a construction cartel backed by code enforecement that says you MUST have a licensed general contractor, electrician , HVAC, framer, etc. to get your house built.
I have built two homes already and plan to build one more. But, if you build something very non traditional (like Log plans to) you may have a hard time selling it if or when you want to.

The home I have planned for the ranch will also be non traditional. One reason that I picked that area is that the county does not have any building permits or local codes.
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Old 04-21-2010, 11:34 PM
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Originally Posted by hkgonra View Post
In most cities in the country you cannot build your own home. They have a construction cartel backed by code enforecement that says you MUST have a licensed general contractor, electrician , HVAC, framer, etc. to get your house built.
At least here in Wisconsin you only need to have an electrician if you actually hook up to the electrical grid. Obviously you do not need an electrician. Same applies to pipe fitters with septic systems or city sewage. A porta-outhouse could save you a lot of headaches. Likewise, you don't wan to hire a HVAC worker don't install a HVAC system. I have not looked into the general contractor thing yet though. I'm 100% sure that you are correct that you need one when building a traditional house but maybe you do not need one if you build from a log cabin or yurt kit? I don't know, I have not inquired about this yet.
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Old 04-22-2010, 03:57 AM
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Originally Posted by hkgonra View Post
In most cities in the country you cannot build your own home. They have a construction cartel backed by code enforecement that says you MUST have a licensed general contractor, electrician , HVAC, framer, etc. to get your house built.
I have heard that house plans must be ok'd by city office people, but I've never heard that bit b4 about not being able to GC your own home.

I will say that the just makes it more likely that I will live in a rural area.

Monolithic, pumicecrete, papercrete, superadobe, etc... are all stonger, more relaible, more energy efficient AND EASIER TO BUILD and finish than a stick built house.

Of course, this is why they don't like this sort of thing,

However, most city managers will, if spoken to softly and backed with licensed architectural plans, allow you to proceed.

Just takes some effort.

Well worth it considering the cost of purchasing a newly built home.

Log


PS: Of course, one could just bypass all that headache by moving to an area where code is treated as it ought to be.. like the BS it is.
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Old 04-22-2010, 04:23 AM
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I think the major advantage of owning property are two-fold:

1. Actual ownership and the advantages that go with it. With a rental, you are very limited in many things you can do to the house(upgrades etc) and even IN the house. Even limitation on dog breeds, etc.

2. The financial independence that comes with having a PAID OFF house. Obviously as long as you owe on your house it is a lot like renting. The lower monthly payments are offset by the much longer financial obligation. Once you have a place to live that you don't have to pay for, you are well prepared for a lot of what-ifs. You can lose your job and scrape by on VERY little money. Just enough to buy food basically, and you will never be on the street. Property tax obviously complicates this however.
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Old 04-22-2010, 07:44 AM
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My earlier point holds true -- if you're arguing that one more middle-man (bank, government, landlord) decreases cost further, then shouldn't more middle-men make it even cheaper? Come on, it's a crock sales job and everyone knows it. I have to hand it to the corporate media for trying to spin it otherwise lately.

My grandfather owned a large amount of land, multiple homes, pubs, etc. and rented/leased them out. The owner is the lord, the renter is the serf, it's just that simple. You should champion advice that makes people stronger, not weaker -- on a survivalist board of all places.

There's never really been much of a free market in real estate, oil, and a number of other sectors -- basically cornered, manipulated, fixed, denied, conquered by force, etc. from the get-go. Landlords extort whatever they can get away with, and there's no downward pressure when companies like Goldman-Sachs are instrumental in creating bubbles on property, and government greases the wheels and is all too happy to collect higher taxes for its contractors in the wings.

One of the best ways to protect yourself is to buy things as close to original labor cost as possible. When the price of something deviates, ongoing and as a moving target, from whatever the tradesmen earned by originally building the property, you're paying a middle-man -- you're basically paying him for having more money than you. And he's free to creep up into perpetuity, over time becoming totally divorced from the long-since paid carpenters, plumbers, electricians, etc. that actually built the property. What great deal!

Quote:
Originally Posted by HowardRoark View Post
Well, see, that's just it. I can tell you from good experience as a landlord you cannot just willy-nilly say I am going to set rents at 120% of costs. You have a ceiling on what you can charge, the market rent. So the renter is protected by the marketplace. They will go down the street and rent for a lower price. On the other hand the owner gets squeezed between his mortgage and costs on one side and the market rent on the other. Very often that squeeze is so tight there is not room between them. Often, but not always, the owner finances a portion of the costs
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Old 04-22-2010, 08:24 AM
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my problem is with the job i have i really never knew where i would be somedays so renting was the easly route for me ..for allmost two and half years i lived out of a suit case staying in monthly funished type apts .it was ok but in the end i really was tired of the travel and wanted to put down roots more deep than top soil in a area ..
.
i would find this great deals on places but knowing i would never be there long enough to finish the work on the place got old after a time

my land in AZ is free and clear along with the house i have on it ..the home building style was a little diff than a square stick bult home .but it works for me in the long run .. i have address for my mail now and i do not a mail forwarding service anymore ..it nice to have a fixed address in own life for a while..
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Old 04-22-2010, 08:28 AM
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I don't comment in this area but I would like to put my 2 cents in.

I have learned that I am coming out ahead by renting. And here are my reasons:

1) If something breaks I call a guy and he fixes it. I built houses for ten years and I know my way around them but its the time to do it that I dont like spending.
2) If I want to move to another location I just wait out my lease then move with no costs. Or I just buy out the lease.
3) I have zero upkeep with a yard, plumbing and general maintainance on the property.
4) I like to travel alot and by renting i can stay gone for months and I dont have to do anything but kill my main breaker and leave. (also I dont have pets for this reason)

I understand that owning a home is better in the long run but I am more into living my life to the fullest now. I dont really want to work until I retire to then enjoy life. With low overhead costs I can go anywhere and do anything I wish at any time. Just my situation.
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Old 04-22-2010, 08:57 AM
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Quote:
Originally Posted by thatgeorge View Post
At least here in Wisconsin you only need to have an electrician if you actually hook up to the electrical grid. Obviously you do not need an electrician. Same applies to pipe fitters with septic systems or city sewage. A porta-outhouse could save you a lot of headaches. Likewise, you don't wan to hire a HVAC worker don't install a HVAC system. I have not looked into the general contractor thing yet though. I'm 100% sure that you are correct that you need one when building a traditional house but maybe you do not need one if you build from a log cabin or yurt kit? I don't know, I have not inquired about this yet.
Check the codes in major areas, you cannot dig a well you must hook to city water, you must have HVAC system , you must hook to public sewer.

I just saw the other day a woman was evicted from her home because she had disconnected electricity and was running purely on solar, she wasn't able to run HVAC so the house was not suitable for living in or something of that nature according to local code enforcement.
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