Rent vs. Own

NEW -> Contingent Buyer Assistance Program
I think renting is great. Flexibility is a major plus. But if you have excess income, owning is better if you don't overpay for your home. Typically, rental communities are more congestive and noisy than owner-occupied neighborhoods. As for the comparison between investing your money or buying a home, you must also take into consideration that owning eliminates the need to pay rent. Also, owning precludes having to deal with annual rental increases. Since, the value of owning is rather important, there are many of us who would rather buy outside of the county than rent within.
 
<p>"Since, the value of owning is rather important, there are many of us who would rather buy outside of the county than rent within."</p>

<p>Personally, I would rather rent within than buy outside of the OC (if OC is where I want to be) because</p>

<p>1) the cost of commuting is incredibly high both in terms of time and money. With gas prices going to $4 a gallon and traffic getting wore each day, what value would you place on being stuck in traffic for 3 to 4 hours a day? I took a lower paying job in the OC so that I did not have do commute from the OC to LA anymore. It has made my life a lot simpler. </p>

<p>2) there is no "good" alternatives to the OC. I am going to sound a little snobbish but there are simply no "good" communities to live in that is anywhere near the OC. Between the IE, east LA, and Long Beach, I rather rent in the OC than buy a house.</p>

<p> </p>

<p> </p>
 
There's a lot to be said about not commuting.



My wife and I moved from Chino Hills to OC and got back 3 hours of commute time. Every day. For the rest of our lives.



That's like two whole work days a week!
 
<p><em>get paid the remainder of the lease AND get to rent it out to a new tenant. Score!!!</em> </p>

<p>That would be fraud. You're only allowed to collect rent on the broken lease until you rerent the apartment at a comparable rate.</p>
 
Gee, it's perfectly legal here, UNLESS you have it rented already when you get paid. If in 2 or 3 months you do find a renter, I know nothing about Florida law which says you have to give the money back. I'm not even sure if it is unethical or immoral. Why should you be forced to leave the place empty for 6 months? The payment is partly to compensate the landlord for the risk that maybe he can't find anybody.
 
<p>vaseline, </p>

<p> Yep, I used to have a 3-4 hr a day commute when i was going from Irvine to El Segundo. Now I have a 8 mile commute and I could not be happier. I work extra hours, but everything is much better. I can even sneak home and have lunch with my wife some days!</p>

<p>good luck</p>

<p>-bix</p>

<p> </p>

<p>p.s. subletting on a lease is a no-no. Upon being fraudlent, you assume all the resonsibility of the new renter....</p>
 
<p>the landlord is supposed to mitigate damages by rerenting the apartment to someone else as soon as possible, they only get damages up to the extent their losses as if they mitigated (but only if the landlord sues you for the unpaid rent). If paid the rent up until the end of the lease, it is up to the landlord what to do (rerent or not).</p>

<p>it is not fraud, it is a double recovery/windfall to landlord, which is fine. </p>
 
<p>Blackacre....</p>

<p> I would say it depends upon the agreement. I've let people buy out there lease for a lower amount than paying off the entire amount. Mainly because i have to let the apartment be open until the end of the lease (because we did sign a contact for a certain amount of time....). Anyway, that is the way I do things mainly to keep it simple. They could pay up the entire lease and leave then come back.... If it is rented out then i'm going to pay them back PLUS time lost PLUS any "shut-up" fees. Not a good situtation to be in...</p>

<p>-bix</p>
 
<p>biscuitninja: I agree, but if a tenant works out the following arrangement with a landlord, it is like settling a case before even bringing a lawsuit: both agree that the tenant pays off the remainder of the lease and the landlord puts in a provision saying "tenant understands and agrees that landlord can rent out the subject property before the expiration of tenant's lease, at landlord's discretion" or smth to that effect. </p>

<p>Pls do get that in writing, as he said-she said arrangements don't look too good when you end up in litigation...</p>
 
<p>Blackacre... been there, done that, bought the T-shirt. Everything now is put into writing at the initial question. Notes always kept as well as cooling off period. Anyways good luck</p>

<p>-bix</p>
 
I'm not sure what the correct behavior is here... is it okay to necro or start a new thread on the same subject?



Regardless... after reading much of the content of this board... it seems like most people here favor renting over owning... some to the point where the renters think owners are not smart for wanting to own.



I don't know if I've been brainwashed but I've always thought that owning was better than renting no matter what the economic climate but after reading some of the posts here... it does seem like a complicated formula that is predicated by many factors such as timing, affordability and lifestyle.



For me... I would never leave Irvine and I doubt I would follow any type of career that would lead me out of this city. I don't really see renting as an option... and I'm not sure where everyone is getting their numbers but I'm failing to see where renting a 4-5 bedroom house is better use of money than purchasing one. I understand the factors such as where to get the down payment but if you could make the down payment, I'm seeing that the majority would rather invest that money into stocks/bonds and rent rather than purchase. It just seems to me that the tax breaks and write-offs tend to negate the extra expenses that an owner would incur rather than renting. I've read historically the appreciation of real estate is not quite up to par as the stock market but I think the effort to maintain both is different. To me a piece of land just seems more tangible whereas stocks/bonds seem riskier.



It's all about perception I guess... but of all those who are renting... do you really put the money you save into investments to counter the costs of home ownership? And please don't hate me because I own... blame timing.
 
[quote author="irvine_home_owner" date=1220967997]I'm not sure what the correct behavior is here... is it okay to necro or start a new thread on the same subject?



Regardless... after reading much of the content of this board... it seems like most people here favor renting over owning... some to the point where the renters think owners are not smart for wanting to own.



I don't know if I've been brainwashed but I've always thought that owning was better than renting no matter what the economic climate but after reading some of the posts here... it does seem like a complicated formula that is predicated by many factors such as timing, affordability and lifestyle.



For me... I would never leave Irvine and I doubt I would follow any type of career that would lead me out of this city. I don't really see renting as an option... and I'm not sure where everyone is getting their numbers but I'm failing to see where renting a 4-5 bedroom house is better use of money than purchasing one. I understand the factors such as where to get the down payment but if you could make the down payment, I'm seeing that the majority would rather invest that money into stocks/bonds and rent rather than purchase. It just seems to me that the tax breaks and write-offs tend to negate the extra expenses that an owner would incur rather than renting. I've read historically the appreciation of real estate is not quite up to par as the stock market but I think the effort to maintain both is different. To me a piece of land just seems more tangible whereas stocks/bonds seem riskier.



It's all about perception I guess... but of all those who are renting... do you really put the money you save into investments to counter the costs of home ownership? And please don't hate me because I own... blame timing.</blockquote>


No hating here, as I own too. But... what happens when the land value is zero? Did you live here in the early 90s? Did you own in the early 90s? How would you feel if your home price dropped 20% and stayed down there for 5 years? When, if you rented the same property, even with the tax breaks and rent increases, you would have lost more money if you chose to buy? Have you compared the stock market with the housing market from 1990? What did you see? I could keep going, but I'm tired. You may fail to see how renting is better, but you only want to see why owning is better.
 
[quote author="irvine_home_owner" date=1220967997]I'm not sure what the correct behavior is here... is it okay to necro or start a new thread on the same subject?



Regardless... after reading much of the content of this board... it seems like most people here favor renting over owning... some to the point where the renters think owners are not smart for wanting to own.



I don't know if I've been brainwashed but I've always thought that owning was better than renting no matter what the economic climate but after reading some of the posts here... it does seem like a complicated formula that is predicated by many factors such as timing, affordability and lifestyle.



For me... I would never leave Irvine and I doubt I would follow any type of career that would lead me out of this city. I don't really see renting as an option... and I'm not sure where everyone is getting their numbers but I'm failing to see where renting a 4-5 bedroom house is better use of money than purchasing one. I understand the factors such as where to get the down payment but if you could make the down payment, I'm seeing that the majority would rather invest that money into stocks/bonds and rent rather than purchase. It just seems to me that the tax breaks and write-offs tend to negate the extra expenses that an owner would incur rather than renting. I've read historically the appreciation of real estate is not quite up to par as the stock market but I think the effort to maintain both is different. To me a piece of land just seems more tangible whereas stocks/bonds seem riskier.



It's all about perception I guess... but of all those who are renting... do you really put the money you save into investments to counter the costs of home ownership? And please don't hate me because I own... blame timing.</blockquote>
From my personal experience, here's a <a href="http://www.redfin.com/CA/Coto-De-Caza/34-Downfield-Way-92679/home/5020504">house</a> that we were thinking of buying two years ago. It has been on the market for over two years now. It originally came on the market at $1,349,900. After two years and multiple MLS numbers, it is now listed at $989,000 - and still sitting there.



The price has dropped 27 percent in two years. We would have lost our downpayment had we bought two years ago. With a rough calculation, our monthly housing cost would have been about $7,500 per month (20% down, 30-year fixed @ 5%, $210 HOA). This amount would be slightly less with our tax savings. (Forgive me if my calculations are off - it's past midnight and I'm tired).



We are currently renting a beautiful house in the same area with a much better view for only $2,700 per month. The landlord pays the HOA, maintenance issues and property taxes. We are currently saving over $4,800 per month or $57,600 per year. So, in two years we have saved $476,100 (Equity loss of $360,900 + housing cost of $115,200).

In the meantime, we have been saving the difference each month. When we are ready to buy we will be able to buy a much nicer house and we will be able to put down a hefty downpayment. We could even pay for it in cash.



We were also fortunate that we sold in 2006 and banked a nice profit from the sale of our house. So, in our particular situation, we are glad we didn't buy two years ago.



Everyone has different needs and wants. The renting option worked out nicely for us and we are glad we chose that path.
 
[quote author="graphrix" date=1220969311]

No hating here, as I own too. But... what happens when the land value is zero? Did you live here in the early 90s? Did you own in the early 90s? How would you feel if your home price dropped 20% and stayed down there for 5 years? When, if you rented the same property, even with the tax breaks and rent increases, you would have lost more money if you chose to buy? Have you compared the stock market with the housing market from 1990? What did you see? I could keep going, but I'm tired.

</blockquote>
Oh no... don't get me wrong... I know what your saying... especially after reading many posts here.



But in the same vein... not everyone knows how to play the stock market or can wisely invest the money they save from renting. And sure, anyone can buy mutual funds but there also is some psychological factor with paying $200 every month on a portfolio and paying $200 every month on your home.

<blockquote>

You may fail to see how renting is better, but you only want to see why owning is better.</blockquote>
If I only wanted to see why owning is better... I don't think I would have necro'ed this thread. Just the posts here previously have been eye openers and the fact that we are now 8 months later and prices have dropped even more make those warnings more prophetic.



In the end, like others have said... it comes down to timing, affordability and lifestyle. If you're like me and you don't plan no moving out of Irvine and can afford it... I don't think buying a house is that bad if you find the one you absolutely want (like gasjockey in that other thread)... but if you're more transitional and can't make that down payment (or would rather invest it)... I can see why you would want to rent.



I just think that some posters here make blanket judgements without finding out more information about the person who is either going to rent or buy.
 
[quote author="irvine_home_owner" date=1220970985][quote author="graphrix" date=1220969311]

No hating here, as I own too. But... what happens when the land value is zero? Did you live here in the early 90s? Did you own in the early 90s? How would you feel if your home price dropped 20% and stayed down there for 5 years? When, if you rented the same property, even with the tax breaks and rent increases, you would have lost more money if you chose to buy? Have you compared the stock market with the housing market from 1990? What did you see? I could keep going, but I'm tired.

</blockquote>
Oh no... don't get me wrong... I know what your saying... especially after reading many posts here.



But in the same vein... not everyone knows how to play the stock market or can wisely invest the money they save from renting. And sure, anyone can buy mutual funds but there also is some psychological factor with paying $200 every month on a portfolio and paying $200 every month on your home.

<blockquote>

You may fail to see how renting is better, but you only want to see why owning is better.</blockquote>
If I only wanted to see why owning is better... I don't think I would have necro'ed this thread. Just the posts here previously have been eye openers and the fact that we are now 8 months later and prices have dropped even more make those warnings more prophetic.



In the end, like others have said... it comes down to timing, affordability and lifestyle. If you're like me and you don't plan no moving out of Irvine and can afford it... I don't think buying a house is that bad if you find the one you absolutely want (like gasjockey in that other thread)... but if you're more transitional and can't make that down payment (or would rather invest it)... I can see why you would want to rent.



I just think that some posters here make blanket judgements without finding out more information about the person who is either going to rent or buy.</blockquote>
Just this weekend I sat next to someone on a plane. We started talking and he told me that six months ago he bought in the Towers on Jamboree. He said the prices have dropped significantly since he bought the place (he thought he was getting a great deal at the time). Two months after he purchaed the condo, he was unexpectantly laid off from his job and had to find another job. The only job he could find was in Santa Monica. So, now he can't sell his place because the price dropped big time, and the only job he could get is two hours away from his residence. He said he wishes he never bought. He never thought he would lose his job, but things happen.



Of course, I'm not saying that you might lose your job, but we never know what's around the corner. Most people also pay 6% real estate commission as well - so that's another blow to the wallet.
 
Just like with stocks, gains/losses on primary residences are only realized when the property is sold. Hell, I own a townhouse in HB that was worth $450k at the peak and is now closer to $350k today...I guess I lost $100k in gains on paper off the peak (I purchased the property back in 1998 for $119k) but the fact of the matter remains that I rent the property for $1,850/month and have total expenses of $1,400/month (includes a property tax bill of $1,500/yr and a 30-year fixed rate of 5%). But the question, how else will I find a property with a .4% effective tax rate and a 5% mortgage on it that cash flows???
 
CalGal... that's a great example of why renting is better than buying and I appreciate your story.



I think the other underlying thing here is that I read posts that look down at buying and usually use claims that the homes in Irvine are going to lose up to 50% of their peak value. I can see that older homes that had a lower base will certainly lose lots of that equity but I'm not too sure that the new homes bought within the last 5 years will drop by 50%. I have a hard time believing a house that sold for brand new in 2004 for 1.2mil is going to be $600k in the next 2 or 3 years. My memory may be fuzzy but I don't recall Orange County homes in good areas that sold new in the late 80s dropping by 50% by the mid 90s.



I thought the reason people buy in Irvine and why prices are higher is because this area tends to be less prone to real estate devaluation.... but it's also the reason why rent is so high in this city. If we were having this same conversation in Santa Ana (where that 50% thread is primarily based), I could understand the bearishness more... I'm just not too sure how accurate these forecasts are in this area.



Again... I am not opposed to seeing the upside of renting... I just prefer a more balanced discussion.
 
I do not see renting being better than owning or vice versa. My wife and I would rather own, but have chosen to rent for the next few years becuase it is financially to our advantage. IMO, it is important to open one's eyes and not be blinded by propaganda which says that one investment is always better than another or a house is a home and not an investment or vice versa.
 
My wife and I are along the same lines as awgee. Although it has taken me alot of hard work to convince my wife that we don't need to own right now. I show her the number and it only hits home when I have her pay for a nominal amount of closing costs. Hopefully it won't be too much longer, I would like to own a small place again.

Take it easy

-bix
 
I guess what I'm looking for is more reasons to rent because if so many of you are doing it... and the market is in flux right now.... it might be better than "move-up" buying right now.



We want to move to a larger place... the home we currently own is nice but we want to live in a newer home. It seems that renting something like that will cost about $5-6k a month which does save money off of financing a similar home but it's hard to get over that stigma of paying that much money towards property that we don't own. So I'm looking for more reasons to get us over that.



CalGal: Is the home you are renting exactly the same size as the one you were going to buy? Your cost savings are rather significant and you seem to be targeting a similar type of house that I'm looking for in Irvine.
 
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